“Part of that is investing prudently, having a reasoned strategy for what you're doing and not just haphazardly doing things,” Backhaus said.

“A lot of the time it won't be a big deal when it is the same member and same trustee [making decisions], but there's plenty of situations where if these duties are breached, and if for example, there's children who weren't actively involved with the fund, they might want to take action.”

Backhaus also gave an example of where liability for breach of the investment strategy covenants can extend to the adviser or accountant who may have been “involved” in a contravention of the covenants imported under the SIS Act.

“As an example, say your client is a corporate trustee of an SMSF who does not update its investment strategy for five years. The trustee decides to invest 90 per cent of the fund in crypto. You're involved somehow with this. You have to help set up and transfer assets or do something that they direct you to do,” he said.

“The fund then loses everything. Let's assume you're an accountant. Do you think you could be held liable for damage caused to a beneficiary by one of the members of that fund resulting from a breach of the covenants regarding investment strategies? I think yes, you could be liable.’

Backhaus explained the responsibility could be found within the contract advisers or accountants have with their clients such as engagement letters but explained that liability could arise under an often-overlooked section of the SIS Act.

“Section 55 of the SIS Act says that a person who suffers loss or damage as a result of the conduct of another person that was engaged in contravention of the relevant subsections may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention,” he said.

“Section 54B subsections one and two are about big super funds, but s54C is about contravening covenants of regulated superannuation funds; that includes SMSFs so this does apply for persons who suffer loss as a result of covenants not being followed.”

He continued that previously S17 of the SIS Act was removed because the legislature said the term “involved” was defined in the Crimes Act but more recently it was reinstated.

“So, what we have in the SIS Act is that a person will be ‘involved’ in a contravention, if the person [amongst other things] has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention,” he said.

“This seems pretty wide for anyone to be involved in a contravention of the covenants. It can be by omission, by not doing something, you're indirectly a party to a contravention, but I think that if there is someone who's suffered damage, this is an avenue they would look towards.”

He added that this implication of an adviser or accountant being involved in any contravention because they helped in some way with the investment is an area of law which needs to be considered among the broader risks and is especially important within the SMSF sector.