By Millinda Cobban, Associate Director, SMSFcentral
Last reviewed 12 August 2026. Figures current for the 2026-27 financial year.
SMSF trustee responsibilities are personal, and that is the part which catches people out. You can engage an administrator, an accountant, an auditor and an adviser, and the legal obligation still sits with you. Those obligations come from the Superannuation Industry (Supervision) Act 1993, the fund’s trust deed and the tax law, and the ATO enforces them with administrative penalties running from $1,820 to $21,840 a contravention in 2026-27. What follows is what those duties actually amount to in a year of running a fund.
The sole purpose test
Section 62 requires the fund to exist solely to provide retirement benefits to members, or death benefits to their dependants. Every other rule sits downstream of this one.
A fund that buys a holiday house and lets members use it on weekends fails the test. So does a fund that lends a member money for a renovation, or one that buys collectable wine and stores it in a member’s kitchen. Intention is beside the point. The ATO does not have to show the trustee meant to breach anything, only that the fund’s assets serve some purpose other than retirement benefits.
The consequences justify the attention. The fund can be made non-complying and further penalties can be applied.
The investment strategy
Section 52B applies to every SMSF trustee, individual or corporate, and s52B(2)(f) requires a written investment strategy. It has to address diversification, liquidity, the fund’s ability to pay benefits as they fall due, the insurance needs of members, and the risk and likely return of the fund’s investments. Regulation 4.09 of the SIS Regulations then requires regular review.
Regular review is where funds come unstuck. Circumstances move: a member retires and the liquidity profile changes overnight, or a property runs up in value until it represents 80% of the fund and the diversification analysis no longer reflects reality. An investment strategy written at establishment and untouched since is one of the most common findings an auditor raises, and it can end up in a contravention report. Reviewing it annually, and documenting that you did, takes very little time compared with explaining its absence.
Records and evidence
Financial statements, annual returns, trustee minutes and resolutions, changes to the trust deed, and member applications and trustee declarations all need keeping for ten years. Contribution and benefit payment records, investment transactions, bank statements, broker and contract notes, and invoices and receipts for fund expenses need keeping for five. Our guide to SMSF record keeping requirements goes through the detail.
Failing to keep minutes or member records is a contravention in its own right, carrying 10 penalty units, which comes to $3,640 for each trustee in 2026-27. The practical risk is broader than the penalty. If the ATO reviews the fund and you cannot produce the records, you have a problem whether or not the underlying transactions were compliant, because you cannot demonstrate that they were.
The annual audit
Every SMSF needs an annual audit by an approved SMSF auditor registered with ASIC. The auditor must be independent, which rules out a trustee, a member, a relative of one, and in most cases the firm that prepared the accounts. The audit covers both the financial statements and compliance with the SIS Act, and our guide to SMSF audit requirements sets out what the auditor tests.
Section 35C sets two deadlines that trustees routinely miss. Appoint the auditor no later than 45 days before the annual return is due, and give the auditor any document they request within 14 days. In practice that means having an auditor lined up well before the accounts are drawn, not after.
Lodging the annual return
The SMSF annual return combines the income tax return, the regulatory return and the member contribution statement in a single lodgement. Funds lodging through a tax agent generally work to 15 May of the following year, subject to the agent’s lodgement program and the fund’s own history. Repeated late lodgement can prompt the ATO to question the fund’s complying status under s40, quite apart from the failure to lodge penalty itself.
Accepting contributions
Trustees cannot simply bank whatever arrives. Regulation 7.04 sets the acceptance conditions: no member contributions without a valid tax file number, nothing above the fund-capped contribution limit in a single non-concessional contribution, and nothing the trust deed does not permit.
Two points are widely misunderstood. The work test for members aged 67 to 74 has, since 1 July 2022, applied only to personal contributions for which a deduction is claimed, and the ATO tests it at the member’s tax return rather than the fund testing it at the door. Separately, a member’s non-concessional cap is nil for the year if their total superannuation balance at the previous 30 June reached the general transfer balance cap, which is $2.1 million from 1 July 2026. Strictly that is a cap question rather than an acceptance question, but the practical outcome is the same and the trustee is the one who has to notice.
Paying the pension minimum
Where the fund pays a pension, the trustee has to get the minimum annual payment out the door before 30 June. Schedule 7 of the SIS Regulations sets the percentages by the member’s age at 1 July, running from 4% for members under 65 up to 14% at 95 and over. Those rates have applied since 2023-24, when the temporary COVID-era halving ended, and nothing has reduced them since.
Miss the payment and the pension ceases for tax purposes from 1 July of that year. The fund then loses its exempt current pension income for the entire year, which turns a scheduling oversight into a tax bill. Paying on 2 July does not fix a 30 June deadline.
Related party dealings and in-house assets
Section 109 requires every transaction to be on arm’s length terms. The fund pays market value when it buys from a related party, charges market rent when it leases to one, and charges a commercial rate on any lending the rules allow. Undervalued purchases, mates’ rates on rent and interest-free loans all reliably draw ATO attention.
Separately, in-house assets, meaning loans to, investments in and leases of assets to related parties, cannot exceed 5% of the fund’s total assets at market value, measured at 30 June. Breach that and the trustee must prepare a written plan to bring the fund back under 5% and carry it out within the following year.
The trustee declaration
Every new trustee, or director of a corporate trustee, signs the ATO trustee declaration within 21 days of appointment, confirming they understand their obligations. The fund keeps the signed declaration for its life, or at least ten years after the person steps down. Auditors must report a missing or unsigned declaration, and it is a genuinely avoidable contravention.
Education directions
Under s160 the ATO can direct a trustee or director who has breached the Act to complete an approved education course within a set period, produce evidence of completion, and sign or re-sign the trustee declaration within 21 days. Ignoring a direction is itself a 5 penalty unit contravention, which is $1,820 in 2026-27.
The 2026-27 checklist
Run through this once a year, ideally before June rather than after it.
- Trust deed current and updated for recent legislative change
- Investment strategy documented, reviewed and matching the fund’s actual circumstances
- All trustee declarations signed and on file
- Contributions within member caps and accepted in line with regulation 7.04
- Minimum pension payments made, or scheduled with time to spare
- All transactions on arm’s length terms
- In-house assets below 5% of total fund assets at market value
- Financial records complete, current and stored securely
- Approved SMSF auditor appointed at least 45 days before the return is due
- Annual return on track to lodge on time
Common questions
What does a breach actually cost?
Section 166 expresses administrative penalties in penalty units, and the unit is $364 from 1 July 2026. The heaviest contraventions, including lending to a member, borrowing and breaching the in-house asset rules, carry 60 units, so $21,840. Lesser ones carry 20, 10 or 5 units, making $1,820 the smallest. The ATO penalises each individual trustee separately, while the directors of a corporate trustee are jointly and severally liable for a single penalty. Either way the money comes out of your own pocket, because trustees cannot reimburse a penalty from fund assets. In serious cases the ATO can also make the fund non-complying, taxing the market value of its assets at 45%.
Can I hand these responsibilities to my accountant?
You can hand over the work, not the responsibility. If your accountant makes an error and the fund breaches the SIS Act, the ATO looks to the trustee.
Do I really need minutes?
Yes, and they are the cheapest protection available. Document investment decisions, structural changes, pension commencements and benefit payments. Minutes are what show the trustee turned their mind to an obligation before acting rather than afterwards.
Where we fit
Most of the list above is routine once someone is watching it through the year rather than reconstructing it in April. That is what our compliance and administration service does. If you would like a second set of eyes on where your fund stands, call 02 8412 0086 or email [email protected].
This is general information only, not personal financial advice. SMSFcentral does not hold an Australian Financial Services Licence.