Can I get paid for running my DIY super fund?

SMSF technical expert and columnist for The Australian newspaper
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Many trustees are often curious about whether they can receive payments for running their self-managed super fund (SMSF).

Since SMSFs were introduced in 1999, the answer to this question has remained almost the same – trustees can’t be remunerated for any task they do to manage their fund. The specific legislation that defines this says a trustee of a fund can’t receive “any remuneration from the fund or from any person for any duties or services performed by the trustee in relation to the fund”.

But legislation that is currently before Parliament could change the way trustee remuneration is viewed.

The original rule was brought in to stop some small SMSF trustees charging their fund ridiculous or exorbitant fees and it’s not hard to work out how far the potential mischief might go. For example, some people were paying tax-deductible contributions into super and then charging their super fund for their trustee services equivalent to the contribution – a handy strategy for sure and unsurprisingly the government wanted to stamp it out.

So at first glance, banning all forms of SMSF trustee remuneration seems like a reasonable idea. But it normally takes a while after a rule has been introduced for its unintended consequences to appear.

The pitfalls

Let me explain in relation to banning trustee remuneration. Suppose you’ve just had an accident and don’t feel up to the intellectual challenge of personally running your affairs. Sometimes when this happens the Court will appoint a guardian and others to act on your behalf.

For example, the New South Wales Trustee and Guardian (NSWTAG) is a NSW Government Department set up to help you in such circumstances and similar services are available in all states and territories. As you might expect, the NSWTAG charges fees for its services to its ‘clients’.

The charging of fees precludes it from acting as a trustee of your SMSF, which may not be in your best interests.

These unfortunate limitations are about to change because of the legislation before Parliament that is designed to remove various trustee remuneration anomalies.

What can you get paid for? 

If all goes well, you will be able to receive remuneration for your trustee duties if:

  • You’re properly qualified to perform those services;
  • You perform those services in the ordinary cause of a business you perform;
  • You don’t receive remuneration that is more favourable to you than normal (that is, you must charge the super fund an arm’s-length fee) and you only charge for the relevant professional services provided.

This new rule means that a public practising accountant could be remunerated for the accounting services provided to their SMSF. However, this won’t apply to an accountant who is an employee. Similarly, a solicitor in a private practice could be remunerated for the legal services provided to their fund.

The amount charged must only relate to the professional services actually provided and that you’re qualified to provide. For example, as I’m not an accountant, I can’t get paid for preparing my super fund’s financial accounts. Under this legislation, I think a property developer, who runs their own development business, could charge their fund for developing a property for their super fund (but, this might cause some problems elsewhere in the super laws and we’ll look at this in a future article).

The change, once legislated, will apply from 8 October 1999 for individual trustees and 1 July 2007 for corporate trustees.

Why the different start dates?

These were the effective dates when related legislation was put in place impacting trustee remuneration for individual and corporate trustees.

The changes are contained in legislation that seems reasonably uncontroversial and my best guess is that it will pass through Parliament without much fanfare. I expect it to be legislated before the end of 2012, but there’s no guarantee.

In the meantime, I suggest that you hold off on charging your super fund a fee until the legislation has completed its passage through Parliament.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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