Around one in every 30 self-managed super funds will be reviewed by the Australian Tax Office during the 2013-14 financial year, according to the ATO’s compliance program. By financial year-end, the ATO intends to review more than 16,000 SMSFs, checking whether the selected funds comply with tax and regulatory obligations such as lodging returns on time and not using prohibited loans.

The ATO has warned that it intends to focus on SMSFs that misuse the concessional tax environment, either deliberately or unintentionally, especially when dealing with related party transactions, pension income and illegal investments.

If you haven’t already done so, now is a perfect time to conduct a super tune-up on your SMSF. The ATO’s compliance program will cause you no problems if you follow the super rules.

Choosing to run an SMSF means you have signed on as a fund member and a fund trustee. If you started your SMSF after June 2007, then you would be familiar with the SMSF trustee declaration you had to sign, confirming that you understand the responsibilities and duties involved in running an SMSF. The trustee declaration is worth revisiting as a refresher of the super rules. If you started your SMSF before July 2007, the declaration didn’t exist, but you can download a copy from the ATO website.

The superannuation rules offer decent tax concessions for most Australians without the need to risk your super savings by missing lodgement deadlines, breaking the super rules, or mismanaging fund investments.

The SMSF trustee declaration reminds you that you must ensure your SMSF is maintained for the purpose of providing retirement benefits (sole purpose test), properly accept super contributions and pay benefits, appoint an approved auditor each year, lodge annual returns, and keep and store business records. Note that you must value your SMSF assets at market value when preparing financial accounts and statements.

You must also keep your personal assets separate from your SMSF assets. You can now be hit with a fine of up to $11,000 if you fail to do so.

In late 2012, three additional items were added to the trustee declaration, reflecting changes to the laws.

REGULARLY REVIEW STRATEGY

You need to review the investment strategy regularly to ensure it still meets the objectives of your members. According to the ATO, proof of a review can be to document review decisions in the minutes of trustee meetings .

CONSIDER MERITS OF LIFE INSURANCE

You must consider the merits of life insurance for each SMSF member when looking at your fund’s investment strategy, although you are not forced to take out life insurance within your SMSF.

NO PUBLIC FINANCIAL ASSISTANCE

As an SMSF trustee, you need to be aware that you don’t have access to the government’s financial assistance ­program in the event of financial loss due to fraudulent conduct or theft. Note that you may have recourse against a financial adviser if he or she provided inappropriate advice.

REVIEW CURRENCY OF TRUST DEED

Your fund’s trust deed is also an important document for your super tune-up. Any strategies that you implement within an SMSF must be in accordance with your fund’s trust deed and the super laws. Is your trust deed up to date?

If you’re considering starting a pension from your SMSF, ensure you are permitted to access your super benefits, and be mindful of the pension payment rules, especially if you start a transition-to-retirement pension.

When making super contributions, ensure the proper forms are completed, and if you make contributions in retirement, be sure that you satisfy the contribution rules.

If you choose to invest in non-traditional investments such as collectibles, or you use limited recourse borrowing arrangements, then ensure your trust deed permits this type of scenario, ­follow the super rules, and obtain advice if necessary.

 

Sourced from the Australian Financial Review written by Trish Power 5/11/2013