As part of the Government’s stronger super reforms, SMSF trustees must, from 7 August 2012, consider and regularly review whether they should hold insurance for members as part of the fund’s investment strategy.
To determine the level and type of cover, trustees should be taking into account the personal circumstances of the members, as well as any other legislative requirements that the fund must adhere to, eg, the sole purpose test. The details of these decisions may be documented either in the fund’s investment strategy or trustee meeting minutes throughout the year.
It has been noted that fewer than 13% of SMSfs hold insurance on behalf of their members. This new requirement hopes to address this issue by ensuring that SMSF trustees are genuinely considering holding insurance on behalf of members. With this change affecting all SMSFs, many trustees of existing SMSFs will need to update their funds investment strategy as soon as possible to ensure that insurance for fund members is being considered on an ongoing basis. Trustees who intentionally or recklessly contravene this requirement risk fines of up to $11,000 each, or up to $55,000 for a corporate trustee.
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