The Federal government has recently introduced new measures to strengthen the regulatory framework in which self managed superannuation funds (SMSFs) operate. These new responsibilities commenced 7 August 2012 and apply to all SMSF Trustees.
Insurance Needs
A new consideration which must now become a focus for SMSF Trustees is the requirement to consider the insurance needs of all SMSF members and to regularly review their needs.
The government has ensured that SMSF Trustees comply with these new obligations by requiring the SMSF Auditor to report to the ATO any failures to adhere to these new rules. Any failure to adhere to the requirements could result in the fund losing its taxation benefits. It is critical that you are aware of these changes and that you understand and comply with the requirements.
Documentation
The new rules require that the Trustees not only consider the insurance needs of the SMSF members but that they also document their consideration within the fund’s investment strategy and minutes of their meetings. While the regulations do not require that insurance cover be taken out for members, they still must consider whether insurance cover should be held by the fund for each of the members. The regulations do not specify the types of cover but potential insurances might include death, total and permanent disablement (TPD), trauma and income protection.
For all SMSFs, the fund’s investment strategy must include wording in relation to the consideration of insurance for the fund members, the decision on whether or not the SMSF needs to take out insurance for its members, and why (or why not) must be recorded in Trustee minutes. Furthermore, you need to regularly review the investment strategy including the insurance needs of the members and update the strategy and minutes of meetings.
Our Financial Services division can assist Trustees with this analysis for each of your members by assessing their potential risk of financial loss as a result of death, illness or serious injury. Specialist risk management advisory services are available to determine the appropriate types and levels of cover required and to source competitive insurance policies to meet your members’ needs. Alternatively, if you already have your own financial planner or life insurance professional, they too should be able to assist you with your insurance needs.
It is important that action is taken sooner rather than later with regard to this new obligation. Please contact RSM Bird Cameron Financial Services should you require help with regards to timing and the inevitable paperwork.