Tax Tips for Staying Compliant with SMSFs in Australia

Having your own Self-Managed Superannuation Fund (SMSF) allows access to opportunities that wouldn’t be possible with a retail superannuation fund. From being able to purchase a commercial property for your business to operate from to having more control over exactly what assets your superannuation fund owns (shares, collectibles, artwork, precious metals and more), the benefits can be compelling.

However with increased flexibility also comes increased compliance and when it comes to your super, the ATO and ASIC don’t mess around!

With a retail superannuation fund (for example Rest, Australian Super or BT Super), all of your compliance is taken care of by the fund and you will simply receive a statement showing your balance at the end of the financial year. With an SMSF, these administrative duties rest with the trustee, which if you have an SMSF will be you.

Essential Compliance For Self-Managed Super Funds (SMSFs)

End-of-financial-year compliance can be broken down into the following:

Activity Statements: Reporting Requirements

If your fund is registered for GST (e.g., if it owns a commercial property and charges rent), then it will need to lodge activity statements to remit or have GST refunded from the ATO. These will either be monthly, quarterly or annually reporting due dates.

Preparing Accurate Financial Statements for SMSFs

Financial statements for the year 1 July to 30 June of a given financial year need to be completed in accordance with the trust deed, which usually comprise a Profit and Loss Statement and Balance Sheet, amongst other reporting to form one document.

Some trust deeds allow the financial statements prepared annually to be ‘Special Purpose Financial Statements’, which have reduced disclosures and are a lot less complex than General Purpose Financial Statements. Your accountant will generally handle the preparation of this for you.

Tax Return For SMSFs

Your tax return is usually completed by your tax accountant after they have completed your financial statements. The audit must be completed before the tax return can be lodged with the ATO.

SMSF tax is more complicated than an individual and, in some cases, more complicated than a trust/company tax return. Recent years have seen the introduction of measures which have made compliance more complex:

• Balance transfer caps – applicable for SMSF where members have more than $1.6million in their super fund.
• Event-based reporting – the ATO has introduced additional reporting in the tax return for SMSF members.

SMSF Auditing

Every SMSF is required to be audited every year by an independent auditor registered with ASIC. This auditor needs to be independent of your accountants who prepare the financial statements and tax return. This will be a separate fee from your accountant’s fees.

Auditors must be appointed no later than 45 days before the annual tax return is due.

Investment Strategy For Your SMSF

Your investment strategy document needs to be updated every year and signed by the trustees/super fund members to ensure the fund is operating in accordance with the financial strategy wishes of the super fund members (risk appetite), and that asset classes fall within specific percentage guidelines.

Additional SMSF Compliance Factors

There are other aspects of SMSF compliance that should be reviewed regularly in case your circumstances change, however these do not form part of the usual annual work. Examples below:

• Binding Death Benefit Nominations.
• Reviewing whether to TTR (Transition-to-Retirement) or move from accumulation to pension phase.
• If in pension phase, ensuring you are complying with the minimum pension withdrawal.

Understanding Your SMSF Trust Deed

Changes to Australian standards for financial reporting in 2021 mean you must check your trust deed to see how your financial statements need to be prepared. Speak to your accountant or lawyer to help you determine what your specific financial reporting requirements are for your SMSF.

Streamlining SMSF Management For You and Your Accountant

Here are two key practical ways for you to make life easier come tax time for your SMSF:

1. Ensuring bookkeeping for the SMSF is kept up to date with an accounting software like Xero, especially if you are running a business or own multiple commercial properties inside an SMSF.
2. Checking in with your accountant prior to end of financial year to ensure you are complying with minimum pension withdrawal requirements, transfer balance caps, and concessional/non-concessional contribution caps.

Interested In Setting Up A Self-Managed Super Fund (SMSF?)

Contact our team today if you have any questions or if you are interested in learning more about how SMSFs work. If you are interested in having an SMSF set up, speak to our SMSF specialists to ensure it works for your specific financial circumstances.