Last updated April 2026. This article has been refreshed with current contribution caps, penalty frameworks and compliance requirements for 2025–26.
SMSFs remain one of the most flexible vehicles for managing your retirement savings. But flexibility comes with responsibility. As SMSF administrators who have worked with hundreds of funds over the years, the team at SMSFcentral has seen the same compliance issues come up repeatedly – and they are almost always preventable.
Here are five of the most common potholes we help clients avoid, updated for the current regulatory landscape.
1. Assets Not Held in the Correct Name
Superannuation legislation requires that every asset within an SMSF must be held in the name of the fund’s trustee (or the corporate trustee, if applicable). This might sound straightforward, but we regularly see bank accounts, share registries and property titles recorded in a member’s personal name rather than the trustee’s name.
If the ATO’s auditor identifies assets not held in the correct name, the fund can receive a contravention report under section 52B(2)(d) of the Superannuation Industry (Supervision) Act 1993 (SIS Act). This can trigger penalties and, in serious cases, make the fund non-complying – resulting in tax at the highest marginal rate on the fund’s assets.
Where it is not possible to hold an asset directly in the trustee’s name (for example, where a limited recourse borrowing arrangement is in place), a bare trust structure must be used with proper documentation. A Declaration of Trust accompanied by trustee minutes may also be required in certain circumstances.
At SMSFcentral, we proactively review contracts and applications to ensure the correct entity name is being used before settlement or registration. Prevention is far cheaper than correction.
2. Breaching the Investment Rules and Related-Party Restrictions
An SMSF can invest in a wide range of assets – cash, term deposits, listed shares, managed funds, direct property, collectables, cryptocurrency and more. However, all investments must comply with the fund’s investment strategy and the sole purpose test under section 62 of the SIS Act. Every investment must be made and maintained solely to provide retirement benefits for the members.
The most common issues arise around related-party transactions. Related parties include members, trustees, their relatives, and any entity they control. Key rules include:
- In-house asset test: No more than 5% of the fund’s total assets can be invested in in-house assets (loans to, investments in, or leases of assets to related parties) at any time.
- Lending to members: An SMSF cannot lend money to a member or their relative under any circumstances.
- Acquiring assets from related parties: Generally prohibited, with limited exceptions for listed securities, business real property, and certain widely held unit trusts acquired at market value.
- Commercial property leases: An SMSF can lease commercial (not residential) property to a related-party business, provided the lease is on arm’s length terms and the in-house asset rule is not breached.
Breaches can attract administrative penalties of up to 60 penalty units per contravention (currently $18,780 per unit for 2025–26). Where the breach is serious or intentional, the ATO can disqualify trustees and make the fund non-complying.
If you are unsure whether a proposed transaction is permitted, our complex events team can assist with the compliance assessment before you proceed.
3. Using SMSF Money for Personal or Business Purposes
This is one of the most serious contraventions the ATO pursues. An SMSF is not a savings account or a line of credit. Superannuation benefits are preserved until a member meets a condition of release – typically reaching preservation age and retiring, or turning 65.
Common scenarios we have seen include:
- Transferring money from the SMSF bank account to a personal or business account
- Using the SMSF debit card for personal expenses
- Paying personal bills directly from the fund
- A member or relative using an SMSF-owned property as their residence
Any early release outside the legally permitted grounds is a breach of the preservation rules and can result in:
- The amount being treated as assessable income in the member’s personal tax return
- Administrative penalties for the trustees
- In extreme cases, disqualification as a trustee and prosecution
If an amount has been incorrectly withdrawn, it should be repaid to the fund as soon as possible. We strongly recommend that trustees maintain completely separate bank accounts for personal, business and SMSF purposes to eliminate the risk of accidental co-mingling.
4. Failing to Pay the Minimum Pension
Once a member commences a retirement phase pension (account-based pension), a minimum annual payment must be made each financial year. The minimum is calculated as a percentage of the pension account balance at 1 July (or the commencement date, if the pension started during the year), and the percentage increases with the member’s age.
The standard minimum pension percentages for 2025–26 are:
| Age | Minimum pension % |
|---|---|
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95+ | 14% |
Note: The temporary 50% reduction in minimum pension drawdown rates that applied during COVID-19 (2019–20 through 2022–23) has ended. The standard rates above apply for 2023–24 onwards.
If the minimum pension is not paid by 30 June, the pension is deemed to have ceased for tax purposes. The fund loses the exempt current pension income (ECPI) tax exemption for that year, meaning investment earnings that would otherwise have been tax-free become taxable at 15%. The pension would then need to be recommenced, potentially affecting the member’s transfer balance cap.
We recommend setting up automatic pension payments well before 30 June. As part of our service standards, SMSFcentral monitors pension compliance throughout the year and alerts trustees and advisers when action is needed.
5. Poor Record Keeping
SMSF trustees are required to maintain comprehensive records for the fund. Poor record keeping is one of the top audit findings reported to the ATO each year. Missing or incomplete records can make it impossible to verify compliance, calculate tax correctly, or resolve disputes between members.
The ATO’s record-keeping requirements include:
Retain indefinitely:
- Trust deed (and any amendments or updates)
- Trustee consent declarations
- Member applications
Retain for at least 10 years:
- Trustee minutes and resolutions
- Records of changes to trustees
- Trustee declarations (for trustees appointed after 30 June 2007)
- Copies of all reports provided to members
- Records relating to collectables and personal-use assets
Retain for at least 5 years:
- Accounting records, operating statements and statements of financial position
- Copies of all SMSF annual returns lodged with the ATO
- Copies of any other statements lodged with the ATO or provided to other super funds
Good record keeping is not just about compliance – it protects trustees in the event of an ATO audit, and ensures that when a member passes away or a dispute arises, there is a clear paper trail supporting the decisions that were made.
Stay on the Right Side of SMSF Compliance
Most SMSF compliance issues are preventable with the right administration support and proactive monitoring. At SMSFcentral, our role is to handle the tax, compliance and administration detail so that trustees and their advisers can focus on the bigger picture.
Whether you are a financial adviser looking for a specialist SMSF administrator or a trustee running your own fund, we are here to help you navigate the compliance landscape.
Call us on 02 8412 0086 or email [email protected] to discuss how we can help.
The information in this article is general in nature and relates to SMSF compliance and administration matters. It is not financial advice. SMSFcentral does not hold an Australian Financial Services Licence and does not provide financial product advice. If you require advice about your specific financial situation, please consult a licensed financial adviser.
