For an SMSF, this includes whether the trustees of the fund should have life insurance that provides cover for one or more members of the fund.

One reason the legislation has been introduced is that studies have shown that fewer than 13 per cent of SMSFs have insurance.

In many ways, the change is good news for SMSF members: Holding life insurance through a superannuation fund is usually a tax-effective way of having insurance.

The level of cover is not prescribed, and trustees are expected to determine for themselves the type and level of insurance members might require.

In meeting this requirement, trustees are required to take into account the personal circumstances of their members. For example, if a member holds insurance cover outside the SMSF, this should be considered in determining how much insurance, if any, the SMSF should hold.

For newly-established SMSFs, insurance should be considered when formulating the initial investment strategy. For existing SMSFs, this practice should form part of the regular investment strategy review.

It is recommended that trustees document decisions in the fund’s investment strategy or minutes of trustee meetings held during the income year, to show they have considered the insurance needs of members and thereby satisfied the regulatory requirements.

Peter Speechley is a partner with accountants and business and financial advisers HLB Mann Judd, Perth.