SMSF's Hats you need to wear

SMSFs: Wearing All the Hats

Most SMSFs are a two-person show — typically a couple building their super together. But even in this seemingly simple setup, they often end up wearing more hats than a race day crowd at Flemington. Member, trustee, director, shareholder, secretary — you name it, they’re probably juggling it. Let’s untangle this hat parade and figure out what each role really means.

Members: The Simpler Hat

Being a member is the easiest gig in an SMSF. Members are simply the folks who have their super savings in the fund. Mostly.

Yes, mostly, because it’s possible to have a member with no money in the fund. Don’t believe me? Check your trust deed. Some funds kick members out the second their balance hits zero. Others allow you to stay on board, which can be handy for parents wanting their adult kids to help run the fund as trustees without putting any of their own money in yet.

Quick tip: If kids have an enduring power of attorney for their parents, they can help manage the fund without being members, but only if they completely replace their parents as trustees. So, if Mum and Dad still want to call the shots, it might make more sense to add the kids as members.

Trustees: The Big Decisions Hat

Trustees are the ones steering the ship. They make the calls on investments, pick the fund’s suppliers, and decide on benefit payments. While super law usually requires all members to also be trustees, these roles are as different as night and day.

• Members: Can be as self-centred as they want (it’s their money, after all).
  
• Trustees: Must act in the best interests of all members, even if that means saying no to their own whims.
  

Special circumstances? Plenty! For example:

• Minor members: Kids under 18 can have money in the fund but can’t be trustees. Mum or Dad usually steps in until the kid hits 18.
  
• Incapacity: Members with dementia or other impairments can’t legally be trustees, but someone with an enduring power of attorney can take over.
  
• Overseas moves: To keep the fund “Australian” (and avoid nightmarish tax issues), members who live abroad might need someone else to act as trustee in their place.
  

Here’s a real-life scenario: Sherry, a member and trustee, develops dementia. She decides it’s time to step down as trustee, so her daughter Chris, armed with an enduring power of attorney, steps in. Chris and Sherry’s husband Darren take over as trustees. Sherry remains a member, but only because she fully relinquished her trustee role.

Directors and Secretaries: The Corporate Hat Rack

If your SMSF has a corporate trustee (and let’s be real, it should), the “trustees” we’ve been talking about are technically the directors of the trustee company. They handle all the same responsibilities, just under a corporate structure.

Some trustee companies also have secretaries. In the SMSF world, this role is more about convenience than necessity. For example, a secretary can make it easier to sign off on documents with third parties like banks. If you’re the sole director, you can even double as the secretary, streamlining the paperwork further.

Pro tip: If there are two directors in your trustee company, consider making both secretaries. That way, if one passes away, the other can keep things running without a hitch.

Shareholders: The Power Behind the Scenes

For SMSFs with corporate trustees, shareholders hold the reins when it comes to deciding who gets to be a director. While their shares might not be worth much, their influence is invaluable, especially during major decisions like paying out death benefits.

Planning for the future? A couple with three kids might set up their trustee company with 60 shares. Each child inherits 20 shares, ensuring equal control and (hopefully) no family feuds when the parents are gone.

Even members who move overseas can keep their shareholder role. This means they maintain ultimate control of the company, even if they hand over trustee duties temporarily.

Many Hats, One Fund

An SMSF might seem like a simple setup at first glance, but when you break it down, each role carries unique responsibilities. Understanding these hats — and knowing when to swap them — ensures your fund stays compliant and ready for anything life throws at it. At Unfair Advantage Accounting, I’m here to help you manage all the hats with confidence and style. Let’s keep your SMSF running like a well-oiled machine (or a perfectly balanced hat stand).