When One Trustee Dominates: The Gender Gap Risk

In many Self-Managed Superannuation Funds (SMSFs), a familiar but often unspoken dynamic plays out—one trustee takes the lead, while others, often spouses or siblings, remain passive. This imbalance may appear harmless in the day-to-day running of the fund, but from an auditor’s perspective, it can have devastating long-term consequences—particularly when the dominant trustee makes high-risk investment decisions without proper oversight or agreement from the other trustees.

As a specialist firm that audits many SMSFs each year, we’ve seen this pattern emerge time and again. One trustee makes the decisions—frequently around complex or illiquid investments such as leveraged real estate (LRBAs), private companies, unlisted trusts, cryptocurrency, or collectables. Meanwhile, the other trustee(s)—often women—remain in the background, uninvolved, unaware, and at risk.

The fundamental problem? All trustees share equal legal responsibility, regardless of who made the decision. The Superannuation Industry (Supervision) Act 1993 (SIS Act) and the ATO’s Trustee Declaration make this unequivocally clear. Every trustee must:

• Act in the best interests of all members;
• Exercise care, skill and diligence;
• Prepare and regularly review an appropriate investment strategy;
• Keep proper records and ensure all decisions are well documented;
• Be informed about fund investments, insurance and compliance obligations.

When trustees fail to uphold these duties, the consequences can be catastrophic—and disproportionately borne by the passive trustee with the lower balance. In many cases, this is a woman whose retirement security is tied to a fund she has little practical control over.

The Papadam Case: A Cautionary Tale

The Supreme Court case Jenifer Helen Papadam v Smidam Pty Limited serves as a sobering example. Here, a family-run SMSF descended into dysfunction, with years of missing financial statements, inadequate records, and no meeting minutes or up-to-date investment strategy. The trustees were in serious conflict, and the fund was ultimately placed into receivership.

Saul SMSF was appointed by the Court to audit the fund and formulate a rectification plan. Our finding was stark: the fund had failed to meet even the most basic trustee obligations. The lack of compliance and transparency obliterated any hope of a viable audit trail. The fund’s principal asset had to be sold, and the receiver’s fees ballooned to over $130,000, consuming much of the members’ retirement savings.

This wasn’t just poor administration—it was the result of trustees abdicating their legal responsibilities. It was also a vivid illustration of what happens when one trustee takes control and others stay silent.

The Gendered Impact

In our forensic audit experience, it’s not uncommon for the passive trustee to be a woman—often a wife, sister, or daughter—who has deferred to her spouse or male relative on financial matters. The gender super gap is already a national concern, and cases like these only widen it. When high-risk decisions go south, it’s often the member with the smaller balance who suffers most—and often, tragically, without ever knowing the risks were taken in the first place.

What Can We Do?

1. Trustee Education is a Must, Not Merely Recommended
   The ATO trustee declaration is critical—it outlines each trustee’s legal obligations in detail. Yet, far too often, new trustees are told simply to sign it without proper explanation or training. This must change. Education should be a non-negotiable requirement for all trustees.
2. All Trustees Must Be Actively Involved
   Passive trustees cannot sit back and assume everything is being handled correctly. If you are a trustee—male or female—you must attend meetings, review the investment strategy, understand the fund’s investments, and ensure compliance with SIS regulations.
3. Ask Questions
   Probe decision-making and look for patterns of dominance and disengagement. Why? Because understanding is protecting all members’ interests—especially the vulnerable or passive ones.
4. Professional Advice Is Not a Luxury
   SMSFs investing in complex assets—property, LRBAs, private equity, crypto—require robust professional advice. If only one trustee is receiving and acting on that advice, the fund is exposed to risk—and so are its members.

In conclusion, if you’re an SMSF trustee—regardless of whether you hold 90% or 9% of the balance—you are equally liable. The consequences of inaction, ignorance, or deference can be severe. The Papadam case shows what’s at stake. SMSFs can be powerful vehicles for wealth, but only when all trustees lean in and take responsibility.

This is not just about compliance—it’s about fairness, accountability, and closing the gender gap in retirement outcomes.

David Saul is the CEO & Managing Director of Saul SMSF, a specialist independent SMSF audit firm. He has served as a court-appointed auditor in multiple complex SMSF matters and is a founding council member of the SMSF Innovation Council.

SMSF Crypto Investments Soar from $200 Million to $2.5 Billion Amid Crypto Boom and Post-Election Optimism

17 December, 2024

The financial world is abuzz as Self-Managed Super Funds (SMSFs) in Australia embrace cryptocurrencies like never before. What started as a modest $200 million investment in June 2019 has skyrocketed to a staggering $2.5 billion by December 2024, according to the latest Australian Taxation Office (ATO) report. This explosive growth reflects not just a local trend but a global shift towards digital assets, especially following the pro-crypto stance of the newly elected U.S. administration.

From Traditional Portfolios to Digital Diversification

SMSFs have long been the domain of stocks, bonds, real estate, and cash. But the digital revolution is reshaping investment strategies. More trustees are venturing into cryptocurrencies such as Bitcoin, Ethereum, and emerging altcoins, driven by the allure of high returns and diversification benefits.

ATO data reveals that the most enthusiastic crypto investors are:

• Newly Established SMSFs with $1 to $50K: 15% crypto allocation
• Ultra-Wealthy SMSFs with over $50M: 1% crypto allocation

This suggests that both new entrants with smaller balances and seasoned funds with substantial assets are keen to tap into the crypto market’s potential.

What’s Fueling the Crypto Surge in SMSFs?

1. Regulatory Clarity and Global Adoption: Clearer guidelines from regulatory bodies have demystified crypto investments. The 2024 U.S. Presidential election brought a government favorable to crypto innovation, boosting global confidence.
2. Technological Advancements: User-friendly platforms and secure storage solutions make it easier for trustees to manage digital assets. Blockchain tech enhancements add security and transparency.
3. Market Performance: Cryptocurrencies have outperformed many traditional assets. Institutional adoption and innovations like DeFi and NFTs have driven significant gains.
4. Economic Factors: Amid low-interest rates and inflation concerns, crypto offers an alternative with substantial return potential.

Key Considerations for SMSF Trustee

While the crypto wave presents exciting opportunities, it also brings challenges:

• Proper Asset Registration: Ensure digital assets are held in the fund’s name.
• Trust Deed Updates: Include explicit powers to invest in cryptocurrencies.
• Secure Storage Practices: Implement robust cold storage solutions.
• Documented Decisions: Keep detailed minutes of all investment decisions.
• Regular Valuations: Monitor the value and liquidity of crypto assets due to their volatility.

Looking Ahead

The integration of cryptocurrencies into SMSFs signifies a transformative period. Trustees should develop comprehensive investment strategies that not only justify their crypto choices but also address cash flow management, given that these assets typically don’t produce regular income streams.
As the digital asset landscape continues to evolve, staying informed and seeking professional advice is crucial. Balancing innovation with risk management will be key.

Conclusion

The surge from $200 million to $2.5 billion in less than five years highlights a significant shift in investment paradigms. With the global momentum behind cryptocurrencies and evolving political climates, especially post the 2024 U.S. election, SMSF trustees must proceed carefully and be vigilant of their Duties and Responsibilities. The future of retirement investing is here, and it’s digital.
David Saul, principal of Saul SMSF, emphasises the importance of independent audits in preserving the integrity of SMSFs. With over 20 years of experience, David has built a reputation as a trusted and transparent SMSF auditor, dedicated to ensuring best practices in the industry.

David Saul – Managing Director of Saul SMSF

It was February 2021, almost a year into the Covid pandemic, when shocking news emerged from the South Coast of NSW. A running shoe containing human remains washed ashore at Bournda Beach, near Tathra. The shoe and its grim contents had traveled over 450 kilometers from Dover Heights, Sydney. Soon after, police identified the remains as belonging to Melissa Caddick, the now-infamous businesswoman who disappeared in November 2020—just a day after ASIC and police raided her home.

Caddick’s story became a cautionary tale of fraud, betrayal, and deception. Between 2012 and 2020, she misappropriated $20-30 million from clients, including Self-Managed Super Funds (SMSFs), running a Ponzi scheme while posing as a licensed financial adviser. The ripple effect of her fraud triggered legal action, including a class-action lawsuit against SMSF auditors who allegedly failed to detect her deceitful practices.

The Role of SMSF Auditors

The Caddick case shines a spotlight on the critical role of SMSF auditors and why cutting corners in auditing is a dangerous gamble. An SMSF audit isn’t just a regulatory box to tick; it’s a safeguard for trustees, members, and their hard-earned retirement savings. Quality SMSF audits validate compliance with the Superannuation Industry (Supervision) Act 1993 and ensure financial statements are accurate and trustworthy.

As technology advances, fraudsters have grown more sophisticated, using AI tools and digital trickery to produce convincing fake documents. Cases like these underscore why a meticulous, independent SMSF audit is essential for mitigating risks.

Why You Need a Quality SMSF Auditor

Here’s what a quality auditor brings to the table:

1. Compliance Assurance: Ensures your SMSF meets superannuation regulations, avoiding penalties or legal risks..
2. Fraud Detection: Identifies red flags, such as non-existent investments or falsified documents..
3. Risk Mitigation: Protects fund assets by spotting compliance breaches before they escalate.
4. Independence: Provides an unbiased, objective evaluation of the fund’s operations and financials.
5. Trustee Confidence: Reassures trustees and members that the fund is in good hands.
6. Expertise: A professional auditor understands the complexities of superannuation laws and auditing standards.
7. Timely Reporting: Keeps the SMSF on track with regulatory deadlines and resolves issues quickly.
8. Educational Support: Helps trustees understand their responsibilities and stay informed about rule changes.
9. Financial Accuracy: Ensures reliable financial statements for sound decision-making.
10. Member Protection: Safeguards the interests of all members, especially the most vulnerable.

Lessons from the Caddick Affair

The Melissa Caddick case reminds us of the dangers of neglecting due diligence. Trustees must be proactive in verifying their adviser’s credentials, while SMSF audits must adhere to fundamental principles like existence, valuation, and completeness of assets. A robust audit isn’t just about compliance; it’s about trust and safeguarding futures.

Don’t Treat Audits as a Commodity

Too often, SMSF audits are seen as an inconvenient expense rather than a value-add service. But a quality audit is an investment in the fund’s security and longevity—and ultimately, in members’ retirement dreams.

With rising financial risks and sophisticated fraud, the importance of choosing an experienced, independent SMSF auditor has never been clearer. When the stakes are your retirement savings, there’s no room for shortcuts.

David Saul is the Managing Director of Saul SMSF, an independent SMSF auditing firm with over 20 years of experience. Known for delivering best practices and trusted advice, David is committed to protecting the financial future of SMSF members.