One of the conditions of meeting the definition of a Self Managed Super Fund is that trustees cannot be remunerated for their services.
There is a need however to distinguish between services that may be provided as a trustee for which no remuneration can be provided, against services provided by an individual but not in their capacity as a fund trustee/director. An example of this is a builder who renovates a property owned by a SMSF where he is the trustee or director of a corporate trustee.
Clarification of this issue has been long overdue, and finally we have seen the ATO through TIES (Tax Issues Entry System) escalate this issue with Treasury to add certainty to the interpretation contained within superannuation law (SIS Act). Tax Laws Amendment (2011 Measures No. 9) Bill 2011, has been introduced to clarifies that the prohibition on the remuneration of trustees and directors of a corporate trustee of the fund applies only to duties or services performed in:
- the capacity of trustee or in the capacity of corporate trustee director; and
- connection with the body corporate’s capacity of trustee.
Section 17B will be inserted into the SIS Act, which will place certain restrictions on trustee remuneration for non-trustee duties and services. The purpose of these restrictions is to ensure that trustee remuneration is not used by trustees to obtain access to their superannuation benefits before they are eligible.
What can trustees/directors be remunerated for?
Trustees and directors may be remunerated for non-trustee duties or services, provided that:
- they are appropriately qualified and licensed to perform the duties or services;
- the duties or services are performed as part of a business through which the trustee or director provides the same services to the public; and
- the remuneration is on an arm’s length basis.
When does this take effect?
Subsection 17B(1), which applies to remuneration of trustees, applies from 8 October 1999 because this is when paragraphs 17A(1)(f) and (2)(c) were inserted. Subsection 17B(2), which applies to the remuneration of a director of a body corporate that is trustee of the fund, applies to the 2007-08 income year and later income years because those are the income years to which paragraphs 17A(1)(g) and (2)(d) apply.