Identifying Fund Assets - You May Need to Take Action!

The failure of trustees to adequately identify property as belonging to the super fund is a commonly reported SIS contravention.

One of the principal duties of an SMSF trustee is to protect fund property.  This includes ensuring control over the fund property, ensuring the fund’s ownership of property is adequately recorded, retaining control of fund property title documents, investing fund property and, in the case of tangible property, protecting the property from physical damage and insuring the property against such damage or theft.

Maintaining an adequate record of ownership of the fund property can be difficult.  This is because the super fund is not a legal person and cannot own property.  Instead, the owner is the trustee, who holds the property on trust in accordance with the terms of the super fund trust deed. 

Because the trustee is the registered owner, confusion can arise as to whether the trustee is holding that property in its capacity as trustee of the super fund (i.e. the property is fund property) or in its own capacity (i.e. the property is not fund property).

This is particularly difficult where the property is real estate.  In some states, persons who own property as trustees may not be able to have their trustee status recorded on title. 

For example:

If Bill and Mary Smith are the two members of the “B & M Super Fund” and also are the only trustees then any real estate which is fund property must be recorded on the certificate of title as:

“Bill Smith and Mary Smith as joint tenants”

The certificate of title cannot record “B & M Super Fund” as the owner as a super fund is not a legal person.

Also, the certificate of title cannot record “Bill Smith and Mary Smith as trustees of the B & M Super Fund” as land titles do not, in general, record beneficial interests or ownership in a representative capacity.

In other states (for example, Queensland), trustees have the option of recording their capacity on title.

If a trustee cannot or does not record on a public register that it holds the property as trustee, it is very important the trustee keeps adequate records confirming the property is fund property.  At the very least, the records should contain appropriately drafted resolutions or declarations and copies of the fund’s bank statements evidencing that all expenses (including deposit and purchase price of the property) have been paid by the fund.