In many self-managed super funds (SMSFs), one person does most of the work. A financially confident spouse manages the investments while the other signs where they are told; one Business partner handles the fund while the others stay out of it. It feels practical. It is also a serious risk, because Superannuation law makes every Trustee responsible for the fund's decisions — including decisions made by the other trustees. There is no such thing as a passive, hands-off SMSF trustee who escapes responsibility ATO obligations.

Every member must be a trustee

An SMSF is built on the principle that its members run it. Every member must be a trustee (or a director of the fund's corporate trustee), and all trustees are responsible for running the fund and making decisions in the best financial interests of all members ATO obligations. You cannot be a member who simply hands control to someone else and looks away. The law expects each trustee to be genuinely involved in the fund's governance.

You are responsible for others' decisions

Here is the part that surprises people. The ATO states plainly that you are responsible for decisions made by other trustees, even if you were not involved in making them ATO obligations. If your co-trustee makes a prohibited investment, lends fund money to a relative, or misses a compliance obligation, you are jointly responsible for that breach. “I didn't know” and “my spouse handled everything” are not defences. The Liability is shared precisely so that trustees cannot avoid accountability by staying deliberately uninformed.

How penalties fall — individuals versus a company

The structure of your fund affects your exposure. Where an SMSF has individual trustees, administrative penalties for many contraventions are imposed on each trustee separately — so a single breach can generate multiple penalties, one per trustee. Where the fund has a corporate trustee, the penalty is generally imposed once on the company ATO obligations. For a two-member fund, individual trustees can therefore mean double the penalty for the same breach. This is one practical reason many advisers favour a corporate trustee, though the directors of that company still share responsibility for the fund.

Best financial interests of all members

The shared responsibility also has a positive duty attached: every trustee must act in the best financial interests of all members, not just themselves ATO obligations. In a fund with several members, a dominant trustee who runs things to suit one member can breach that duty, and the other trustees — by allowing it — share the exposure. This is why staying informed is not only self-protection but part of the job: you cannot judge whether decisions serve all members if you do not know what those decisions are. A hands-off trustee cannot fulfil the best-interests duty, because fulfilling it requires actually paying attention.

The “sleeping trustee” is still liable

It can feel unfair that a trustee who trusted their spouse or partner is penalised for that person's mistake. But the rule reflects the nature of an SMSF: the trade-off for its control and flexibility is that every trustee must actually engage. A trustee who signs documents without reading them, never reviews the fund's investments, and leaves everything to another is not fulfilling their duties — and the law treats their inattention as their own failing, not an excuse. Being a “sleeping” trustee is not a lower-risk role; it is a full-risk role performed badly.

Disqualification and other consequences

Administrative penalties are not the only risk of shared responsibility. In serious cases, trustees can be disqualified — barred from acting as an SMSF trustee — or the fund can be made non-complying, with severe tax consequences borne by the whole fund ATO obligations. A disqualified trustee may be publicly listed, which can carry professional and personal consequences. These outcomes fall on trustees collectively, so a co-trustee's serious misconduct can jeopardise your standing as well as your savings. The gravity of these consequences is exactly why the law refuses to let a trustee shelter behind ignorance of what another trustee did.

A hypothetical example

Hypothetical: Two sisters, Priya and Anita, are individual trustees of their SMSF. Priya runs everything; Anita signs whatever Priya puts in front of her. Priya arranges for the fund to buy a holiday unit that the family uses occasionally — a breach of the sole purpose test and the related-party rules. When the auditor reports it, both sisters are liable. Because the fund has individual trustees, an administrative penalty for the contravention can be imposed on each of them, so Anita faces her own penalty despite never choosing the investment. Had Anita stayed genuinely informed, she might have questioned the purchase before it happened. Her hands-off approach did not shield her; it exposed her.

How to protect yourself

The solution is engagement, not paperwork. Stay informed about what the fund is doing: review its investments, understand its obligations, and insist on seeing decisions before they are made, not just after. Ask for regular updates and read them. Make sure you receive the fund's statements and the auditor's findings. If you genuinely cannot or will not participate — because of ill health, distance, or a breakdown in the relationship between trustees — take action rather than drifting: that may mean stepping down as a trustee (and as a member), restructuring the fund, or in some cases winding it up ATO SMSF Investment requirements. Note, though, that resigning does not erase responsibility for breaches that occurred while you were a trustee.

The appeal of an SMSF is control, and control is shared among all the trustees. So is responsibility. If you are going to be a trustee, be an active one — ask questions, review decisions, and treat the fund as yours, because in the eyes of the law it is. And if a co-trustee resists your involvement or keeps you in the dark, treat that as a warning sign worth acting on rather than a convenience to enjoy. A hands-off trustee is not a safe passenger; they are a driver with their eyes closed, sharing full liability for wherever the fund ends up.