You need to manage your fund’s investments separately from the personal or business investments of members, including your own. This includes ensuring the fund has clear ownership of its investment assets.
To protect fund assets in the event of a creditor dispute, and prevent costly legal action to prove who owns them, assets should be recorded in a way that:
- Distinguishes them from your personal or business assets
- Clearly shows legal ownership by the fund.
Fund assets (other than money) should be held in the name of either:
- The individual trustees 'as trustees for' the fund
- The corporate trustee 'as trustee for' the fund.
The assets can't be held in the name of a trustee or a member as an individual. Nor can they be held by a standard employer-sponsor or their associate.
In some circumstances, assets of the fund can be leased to a related party of your fund, such as business real property and in-house assets. There are restrictions on the types of assets your fund can invest in. It’s a good idea to speak to us to make sure your investments comply with the law.
The easiest way to comply with the ownership rules is for your fund to have a company set up solely for the purposes of being the corporate trustee of the fund.
If there is a change in directors of the company, you don't have to change the name on the ownership documents for each fund asset as the trustee of the fund has not changed. A separate corporate trustee reduces the chance of personal assets becoming intermingled with fund assets.
Trustees joining or leaving
If an individual trustee joins or leaves your SMSF you must change the names on the ownership documents (such as a title deed) for each fund asset. Document this change in your records, along with clear evidence to support the fund's ownership of the asset.
Some systems, such as some share trading accounts, will not allow more than three names to be recorded on the online share application form as trustees of a super account. If there are four trustees, document the names of all individual trustees in your fund's records as owners of the shares.
Assets unable to be held in fund's name
An unavoidable restriction (such as state law) may prevent your SMSF from holding assets using the fund's name.
If assets cannot be held in the fund's name, ownership by the fund must be clearly established. You can do this by executing a caveat, or creating an instrument or declaration of trust to enable the fund to assert its ownership.
If possible, documents such as sale agreements should be executed in the name of the trustees 'as trustees for' the fund.
Limited recourse borrowing arrangements
If you enter into a limited recourse borrowing arrangement, ensure correct asset ownership before and after transfer of the trust asset.