02 9683 5999CIB Accountants & Advisers is proud to announce the introduction of a SMSF Division within the firm. Legislation effecting superannuation funds has increased in complexity over the past few years and the firm identified the need have dedicated staff who are specialised in superannuation law.
As a result we have formed a specialised division to ensure that our client’s have access to staff who can provide the right advice for their superannuation fund. The aim of the division is not only to streamline the preparation of the annual financial statements and income tax returns, but also to assist trustees to comply with the superannuation rules and keeping trustees aware of any regulatory changes.
Like most businesses, running a superannuation fund (SMSF) requires ongoing management and it is important that trustees monitor not only the fund’s investments but also other administrative aspects of the fund. Running a SMSF is not simply managing investments and having annual financial statements and income tax returns prepared.
THE FOLLOWING ARE KEY POINTS TRUSTEES NEED TO BE AWARE OF WHEN RUNNING A SMSF
- Prepare minutes when making investment decisions to demonstrate that you have considered the risks and returns to the fund and its members and that the investment is in accordance with the fund’s investment strategy.
- Ensure your bank account does not go into overdraft. An overdraft is a form of borrowing and a SMSF can only borrow in a limited number of circumstances.
- Do not borrow unless it’s under a limited recourse borrowing arrangement. If you are considering using a limited recourse borrowing arrangement it is imperative you structure it correctly and have the right documents in place for your fund to remain compliant and to avoid double stamp duty or additional tax.
- Do not purchase assets from a member or a relative of a member, unless it is a listed security or business real property. n Keep the SMSF’s assets and money separate from personal (or business) money and assets. In particular make sure that any term deposits are clearly in the name of the SMSF.
- On 7 August 2012 regulations changed requiring trustees to consider the need for insurance of members within the SMSF. This needs to be looked at even if the member holds insurance outside of the SMSF. An example of where insurance may be appropriate is where the main asset of the SMSF is your business premises – would the asset have to be sold to pay the death benefit if one of the members passes away.
- Once your turn 65 you must satisfy a work test to make contributions into your SMSF. The work test requires you to work 40 hours in any consecutive 30 day period each financial year. Please note unpaid work does not satisfy this requirement.
- Once a member turns 65 they no longer have access to the bring forward rule for personal contributions (i.e. members will not be able to make personal contributions in excess of the annual limit of $150,000).
- Trustee’s also need to ensure that they advise the ATO of any changes effecting the fund (e.g. a change of address of the trustee) within 28 days.
- In addition to complying with current superannuation regulations trustees must also comply with the rules of the fund as set out in the trust deed.
- All members of the fund must be a trustee or a director of the corporate trustee although special rules apply for minors.
HOW TO AVOID BREAKING THE RULES
The best way to avoid breaking the rules is to be active in the management of your SMSF and to ask questions of your professional adviser Prior to entering into any transaction with a related party or which is complex or unusual speak with your professional adviser to ensure that the transaction is permitted.
WHAT CAN HAPPEN IF YOU BREAK THE RULES
Generally the Australian Taxation Office takes a consultative approach to compliance where they work with the trustees to bring the SMSF back into line with the regulations. However in a number of extreme cases of non compliance the Tax Office has taken action against the trustees and made the fund non complying (effectively taxing the assets of the fund at 46.5%).
WHAT TO DO IF YOU BREAK THE RULES
If you find that you have broken one of the rules the best course of action to take is to rectify it as soon as you become aware of the breach. Whilst this may not avoid the auditor reporting the breach to the Tax Office it will assist in minimising (or possibly avoiding) any penalties.
If you are in any doubt regarding a possible breach of the rules you should contact your professional adviser to ascertain the most appropriate course of action.
