Under section 17A of the SIS Act a fund is an SMSF only if it has no more than six members, every member is a trustee or director of the corporate trustee, no member is the employee of another unless they are relatives, and no trustee is paid for services in relation to the fund. Exceptions cover a member's death or incapacity.
A self-managed super fund (SMSF) is not just a fund you happen to run yourself. The Superannuation Industry (Supervision) Act 1993 (SIS Act) defines it, and a fund that stops meeting the definition stops being an SMSF. This article sets out the conditions in section 17A, the rules about paying trustees, and the exceptions that matter in retirement, when a member dies or loses capacity. Sources were read on 5 October 2026.
The core conditions
Section 17A says a fund with two or more members is an SMSF if and only if it meets these conditions (SIS Act s17A, ATO Legal Database):
- it has no more than 6 members
- if the trustees are individuals, each individual trustee is a member
- if the trustee is a company, each director is a member
- each member is a trustee, or a director of the corporate trustee
- no member is an employee of another member, unless the members concerned are relatives
- no trustee receives any remuneration from the fund, or from anyone else, for any duties or services performed by the trustee in relation to the fund
- if the trustee is a company, no director receives any such remuneration.
The ATO's page on choosing your trustee structure (last updated 14 August 2026) summarises the same points and states: "Individual trustees and directors of the corporate trustee cannot be paid for their duties or services performed as trustee in relation to the SMSF."
Single-member funds
A fund with only one member has its own conditions. If the trustee is a company, the member must be the sole director, or one of only two directors where either the other director is a relative or the member is not an employee of the other director. If the trustees are individuals, the member must be one of only two trustees where either the other trustee is a relative or the member is not an employee of the other trustee. The same no-remuneration conditions apply. The ATO summarises it as: a single-member fund must have two trustees, and only one needs to be a member.
The "no pay" rule in practice
The rule is wide: the trustee cannot receive remuneration "from the fund or from any person" for duties or services performed in relation to the fund. If you are a trustee, you should not be paid for acting as one, so check any arrangement where a trustee, or a business a trustee owns, is paid by the fund; the sole purpose test and arm's-length rules also apply. See our articles on the sole purpose test and on buying assets from related parties.
Employer-employee members
The employee rule matters most in family funds that include a business. A member cannot be an employee of another member unless they are relatives. Section 17A also extends the meaning: a member who is an employee of an employer-sponsor of the fund is treated as an employee of another person if the employer-sponsor is a relative of that person, or a body corporate of which that person or a relative is a director. This is why a fund with a business partner or a business's staff as members needs checking.
Exceptions that matter in retirement
Section 17A says a fund does not fail the conditions "by reason only that" certain things apply. Among them:
- A member has died. The member's legal personal representative can be a trustee, or a director of the corporate trustee, in place of the member, from the date of death until death benefits begin to be payable.
- A member is under a legal disability, or the representative holds an enduring power of attorney. The legal personal representative can be the trustee in place of the member for as long as the member is under a legal disability or the representative has an enduring power of attorney for the member.
- A member is a child without a legal personal representative. The parent or guardian can be a trustee, or a director, in place of the member.
- Public Trustee arrangements. Specific conditions apply where a State or Territory Public Trustee is involved, including written approval of an individual who is appropriately qualified and licensed.
- An acting trustee appointment under the Act is in force.
These matter for planning: see our articles on SMSF trustee succession and on a surviving spouse as sole trustee, and on the structure choice in corporate versus individual trustees.
If a fund stops being an SMSF
Section 17A gives a time limit: if a fund would otherwise cease to be an SMSF, it does not cease until the earlier of the appointment of an RSE licensee and 6 months after it would have ceased. The Act says this relief does not apply if one of the reasons the fund would cease to be an SMSF was the admission of new members. The 6-month window is a time to fix the problem, not a reason to delay. Specialist advice is needed on what follows when a fund can no longer be treated as an SMSF.
Worked example
Illustrative only, not personal advice.
Pete, 68, and his wife Anna, 66, are the two individual trustees and only members of their SMSF. Their daughter Kate runs a bookkeeping business and offers to prepare the fund's accounts for a fee. Kate is not a trustee or member, so section 17A's no-remuneration condition does not bar her from being paid for that work, though the payment must still be at arm's length and for the fund's purposes. If Kate later joined as a member and trustee, being paid for the accounting work would breach the condition, because it covers any duties or services a trustee performs in relation to the fund, and the fund would need to be corrected or restructured. Because Kate is a relative, the employee rule would not stop her being a member alongside a parent who employs her.
Sources
Key takeaways
- Section 17A allows no more than six members, and each member must be a trustee or a director of the corporate trustee.
- Trustees and directors cannot receive remuneration from the fund or anyone else for duties or services performed in relation to the fund.
- A member cannot be an employee of another member unless the members are relatives.
- A legal personal representative can act as trustee in place of a member who has died or lost capacity, or whose enduring power of attorney they hold.
- If a fund would otherwise cease to be an SMSF, section 17A gives up to six months, or until an RSE licensee is appointed if earlier, but not where new members were admitted.
Frequently asked questions
How many members can an SMSF have?
No more than 6 members, according to section 17A of the SIS Act and the ATO. Each member must be a trustee, or a director of the corporate trustee.
Can an SMSF trustee be paid?
No. Section 17A requires that no trustee, or director of a corporate trustee, receives any remuneration from the fund or any person for duties or services performed in relation to the fund.
Can an employee be a member of the same SMSF as their employer?
Only if they are relatives. Section 17A says no member may be an employee of another member unless the members concerned are relatives.
What happens to an SMSF when a member dies?
A fund does not fail the section 17A conditions only because the member's legal personal representative acts as trustee in place of the member from death until death benefits begin to be payable.