Keeping money and other assets separate from those of other parties

Has a contravention of section 34 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where a Self Managed Superannuation Fund (SMSF) shares a bank account with related unit trusts?

Yes, an SMSF must open and maintain its own bank account, as it is required to keep its assets and money separate from that of other entities.

The trustees of the SMSF are members of a family.

The fund has a standard employer-sponsor and all the trustees work for the standard employer-sponsor in various capacities.

There are several unit trusts owned and operated by the SMSF and/or the trustees.

The trustees have stated that, for administrative simplicity and cost savings, unit trusts jointly owned by the SMSF and trustees as well as unit trusts owned solely by the SMSF all operate using the one bank account. The account is held in the name of the SMSF.

Subsection 31(1) of the SISA provides for the regulations to prescribe standards applicable to the operation of regulated superannuation funds (which includes a complying SMSF) and to trustees of those funds. Subsection 34(1) of the SISA requires each trustee of a superannuation entity to ensure that the operating standards are complied with at all times. A failure to do this is considered to be an offence under subsection 34(2) of SISA.

Regulation 4.09A of the Superannuation Industry (Supervision) Regulations 1994 (SISR) states that for the purposes of subsection 31(1) of the SISA, a trustee of an SMSF must keep the money and other assets of the fund separate from any money and assets respectively: (a) that are held by the trustee personally, or (b) that are money or assets of a standard employer- sponsor, or an associate of a standard employer-sponsor, of the fund.

The unit trusts are associates of the standard employer-sponsor of the fund in accordance with section 12 of the SISA. Keeping all of the unit trusts' money in the SMSF's bank account, including those trusts jointly owned by the SMSF, is not in line with the requirements of regulation 4.09A of the SISR and therefore constitutes a contravention under subsection 34(1) of the SISA.

Note: While this ATO ID looks specifically at bank accounts, the principles of regulation 4.09A of the SISR apply to all types of assets, including shares, units in a trust and other property.