Control means being the decision-maker

In an SMSF, the trustees choose the investments, set the strategy and decide how the fund operates within the law. There is no product provider filtering Options or handling compliance in the background.

The regulator expects trustees to act with the care, skill and diligence of an ordinary prudent person, and to put the fund's sole purpose, providing retirement benefits, ahead of personal convenience.

The duties that come attached

Being a Trustee brings a defined set of legal obligations: meeting the sole purpose test, keeping fund Assets separate from personal assets, preparing and following an Investment strategy, complying with investment restrictions, valuing assets at market value, arranging an independent annual audit, lodging the annual return and keeping proper records.

These duties apply from the first day and continue for the life of the fund, set out principally in the Superannuation Industry (Supervision) Act 1993. Delegating tasks to an Accountant or administrator does not shift the underlying responsibility away from the trustee.

Consequences of falling short

The ATO can apply administrative penalties, set in penalty units. From 1 July 2026 a penalty unit is 364 AUD, so a breach carrying 60 penalty units, such as lending fund money to a member, equates to 21,840 AUD, applying to each individual trustee separately.

The regulator can also require trustees to undertake education, direct them to rectify a breach, accept an enforceable undertaking, or in serious cases disqualify a trustee or make the fund non-complying, which carries heavy tax consequences.

A practical illustration

Consider a hypothetical example. Leah sets up an SMSF and enjoys selecting investments. One year, short of cash personally, she borrows a few thousand dollars from the fund intending to repay it quickly. This breaches the ban on providing financial assistance to members.

Even though repaid promptly, the contravention can attract administrative penalties and must be reported by the auditor to the ATO. Most serious contraventions the regulator sees stem from convenience or haste rather than deliberate wrongdoing.

Keeping up as the rules change

Contribution caps are indexed, tax settings evolve and new measures are introduced, so a fund run on an outdated understanding of the rules can drift out of compliance. The concessional contributions cap rose to 32,500 AUD for the 2026-27 year, and a separate tax under Division 296 applies to Earnings on very large balances above 3 million AUD.