SMSF Audit

Webinar — new compliance treatments for SMSFs

 

In June 2014, we ran a free webinar program about our SMSF compliance approach from 2014, and the new compliance treatments for SMSF trustees which will come into effect on 1 July 2014.

In the webinar, we discussed determinants for the compliance treatments and included case studies. The new compliance treatments include:

  • education directions
  • rectification directions
  • administrative penalties.
WatchWebinar – new compliance treatments for SMSFs

End of watch

Further informationThis video runs for 48 minutes and 48 seconds. Alternatively, you can read the Transcript.End of further information

For answers to questions raised during the webinars, see Your questions answered.

for more info please follow ATO link here

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Changes to insurance provided by SMSFs

From 1 July 2014, trustees of an SMSF cannot provide an insured benefit in relation to a member of the fund unless the insured event is consistent with one of the following conditions of release of a member’s super benefits:

  • death
  • terminal medical condition
  • permanent incapacity (causing the member to permanently cease working)
  • temporary incapacity (causing the member to temporarily cease working).

An insured event covered by a trauma insurance benefit (which covers conditions such as cancer, stroke, and heart attack) is not consistent with any of the above conditions of release.

SMSFs that provided a trauma insurance benefit to a member who joined the fund before 1 July 2014, and was covered before that date, are allowed to continue to provide that benefit to the member after that date. A member cannot change the type of trauma insurance cover they had before 1 July 2014; however, they can increase or decrease the level of their existing cover from that date.

For more info please follow ATO link here.

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Register of SMSF messaging providers

From 1 July 2014, self-managed superannuation fund (SMSF) trustees are required to receive both electronic messages and payment when employers make contributions using the SuperStream data and payment standard.

Find out moreSMSFs – the SuperStream standard for contributions

End of find out more

If you are an SMSF trustee, you will need an electronic service address (alias) to be able to receive data messages associated with employer contributions sent using SuperStream. The electronic service address (alias) is used to identify where contribution messages for your SMSF are to be sent. You need to provide this to your employer.

To help you register and obtain an electronic service address, we have published two registers of SuperStream messaging providers:

  • The first register includes providers whose services are open to all SMSF trustees.
  • The second register lists providers whose services are restricted to existing SMSF clients.

The register includes details about where to find more information about the service providers. Click on the provider’s name in the register to go to their website, or use the phone number or email address in the last column to get in touch with the provider.

Related party employer are exempt – not required to register.

 

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SMSF trustee – individual or corporate ?

There are two different trustee structures for a self-managed super fund (SMSF).

They are:

  • Individual trustees, where each member of the fund is a trustee.
  • A corporate trustee, where each member of the fund is a director of the trustee company.

The following table outlines some of the issues relevant to each structure:

Consideration Individual Trustee Corporate Trustee
Cost Ongoing administrative requirements and establishment costs can be less for individual trustees than those associated with a corporate trustee because there are no Australian Securities & Investments Commission (ASIC) annual or upfront establishment fees.

There can be higher costs for individual trustees later, as noted below in discussingAdministration of fund assetsPenalties, andSuccession.

Appointing a company to act as trustee raises initial costs for trustees, including upfront and ongoing administration costs.

ASIC charge $457 (excluding GST) to register a company for the first time. There is also an annual fee, depending on the purpose of the fund:

  • $45, if a company acts solely as a super fund trustee
  • $243, if a company is a super fund trustee and also performs another function – eg used to run a business.
Administration of fund assets If a new trustee is appointed (such as they become a member of the fund) or an individual trustee is removed (such as they cease to be a member), changes to the title of the SMSFs assets are required to show the current trustees, and this can be a costly and time-consuming process.

Title changes as a result of changes in membership may incur a fee from the relevant state (government) authority. Most financial services also charge fees, in addition to any duties that may be payable to the state authority for the amendments to the title of the assets within the SMSF.

The recording and registering of assets can be simpler, particularly if there are changes in membership. When members commence or cease membership of the SMSF, the process involved requires that the person becomes, or ceases to be, a director of the corporate trustee and notify ASIC and ATO of this change. The corporate trustee does not change just because someone becomes a member or stops being a member.

As a result, title to the SMSF’s assets remains in the name of the corporate trustee and there are no costs associated with title changes.

Separation of assets One of the important superannuation legislation requirements is that the assets of the fund must be kept separate from any assets held personally by the trustee. With individual trustees, there might be inconsistencies with the separation of assets between SMSF assets and personal assets; there is also a risk that fund assets may be intermingled with personal assets. Contraventions in this regard can incur penalties and other financial consequences. The use of a corporate trustee, with a separate identity, reduces the risk of personal assets becoming intermingled with fund assets.

Also, as companies are subject to limited liability, a corporate trustee will provide greater protection if someone sues the trustee for damages.

Penalties Where a breach of the super law is detected, the new administrative penalties apply to each trustee of the SMSF. Each individual trustee is personally liable for the penalties, which can be up to $10,200 each, depending on the contravention.  

The penalties apply per trustee. With a corporate trustee, there is only one trustee and, therefore, one penalty.

Succession A fund with individual trustees is not likely to continue to operate as usual when changes in trustees occur, unless an appropriate succession plan has been prepared.

For many Australians, super is their largest asset and having an appropriate plan in place for control of an SMSF after death is beneficial.

A company will continue in the event of a member’s death. With a corporate trustee, control of an SMSF and its assets is more certain in the event of the death or incapacity of a member.

 for more information please follow ATO link here

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SMSF supervisory levy

SMSF supervisory levy fact sheet

Up to 1 July 2013, the SMSF supervisory levy is payable for the financial year to which the self-managed super fund annual return (SAR) relates.

From 1 July 2013, the levy will be payable for the financial year in which the annual return is due – for example when you lodge your 2014-15 annual return, you will pay the levy for 2015-16 financial year. This is consistent with the rules for Australian Prudential Regulation Authority (APRA) regulated funds.

In order to bring collections forward, transitional provisions apply to the levy for the 2013-14 financial year so that it is payable in two instalments and collected upon lodgment of the 2013 SAR and the 2014 SAR.

The annual SMSF levy will also increase from $191 in 2012–13 to $259 from 2013–14. The levy will still be collected when the SAR is lodged.

How much will I have to pay per financial year?

The following table provides a summary of payments per financial year for existing and ongoing funds.

To read more click here.

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Maintaining a healthy SMSF sector – Improving the quality of advice

 

Maintaining a healthy SMSF sector – Improving the quality of advice

ASIC today released Report 337 SMSFs: Improving the quality of advice given to investors (REP 337). The report summarises the findings from the first major project undertaken by ASIC’s Self-managed superannuation fund (SMSF) taskforce.

Key points:

  • ASIC has reviewed over 100 pieces of SMSF advice provided to investors
  • Although the majority of advice was adequate, ASIC found pockets of poor advice
  • ASIC’s report contains a number of practical tips advisors can use to improve the quality of SMSF advice

Self-managed super funds represent the fastest growing superannuation sector in Australia, with $439 billion assets held by funds.

ASIC Commissioner Peter Kell said ‘ASIC has ramped up its attention on a sector that is of growing importance to more Australian investors. We want to help ensure that we have a healthy SMSF sector.’ 

‘The decision to establish an SMSF is one of the most significant steps an investor can take in relation to their retirement savings. It involves taking greater personal responsibility for retirement investments. ASIC therefore wants to make sure those investors can be confident they can obtain good quality advice through gatekeepers such as accountants and financial planners,’ Commissioner Kell said. 

‘At the very least, investors need to understand the time, resources, compliance obligations and risks associated with do-it-yourself superannuation, before moving their superannuation savings out of an APRA-regulated environment,’ he said.

 

To read more click here for ASIC web link 

 

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Applying for an ABN for Self-Managed Super Fund

 

Applying for an ABN for Self-Managed Super Fund

The ATO has issued a fact sheet setting out how superannuation entities should apply for an ABN (NAT 2944). The fact sheet also contains the instructions for completing the application, with funds able to apply for an ABN either via the Australian Business Register at abr.gov.au, or by ordering a paper copy online or ringing 1300 720 092.

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Valuation guidelines for self-managed superannuation funds

This guide is designed to help you as a self -managed superannuation fund (SMSF) trustee when valuing assets for super purposes. It is not a comprehensive handbook about valuations.

This guide does not take away your responsibility to manage investments prudently. You must ensure the fund’s investment strategy is reviewed regularly and takes into account the retirement goals of its members.

Summary

Table 1: Summary of valuation requirements

 

Event Requirement
Preparing the SMSF financial accounts and statements Assets should be reported at market value.The valuation should be based on objective and supportable data.
Collectables and personal use assets – acquired after 1 July 2011Transfer or sale to a related party Must be made at a market price determined by a qualified independent valuer.
Collectables and personal use assets – acquired before 1 July 2011Transfer or sale to a related party For the period 1 July 2011 to 30 June 2016 transfers to related parties do not require valuation by a qualified independent valuer. However, these transfers should be made at an arm’s length price that is based on objective and supportable data.From 1 July 2016 transfers to related party must be made at a market price determined by a qualified independent valuer.
Transfers between SMSFs and related parties Acquisitions of permitted assets must be made at market value.Disposals of assets must be made on an arm’s length basis.
Transfers between SMSFs and unrelated parties A valuation is not required however the transfer must occur atarm’s length.
Determining the value of assets that support a super pension The account balance needs to be determined on the commencement day of the pension or, for ongoing pensions, on 1 July of the financial year in which the pension is paid.An annual valuation is generally not required unless there has been event that significantly affects the value of the asset.The valuation should be based on objective and supportable data.
Testing whether the market value of the SMSF’s in-house assets exceed 5% of the value of total assets held by the fund The value of a fund’s total assets needs to be determined on 30 June of the financial year the in-house assets are held.An annual valuation is generally not required unless there has been event that significantly affects the value of the asset.The valuation should be based on objective and supportable data.

Checklist for obtaining valuations

Some assets must be valued in a particular way – these are summarised in table 2. For more detail, see Specific requirements for asset classes.

Table 2: Events and valuations requirements

 

Event Valuation requirement
Preparation of SMSF financial accounts and statements. Based on objective and supportable data
Collectables and personal use assets – acquired after 1 July 2011 and transferred or sold to a related party after that date Qualified independent valuer
Collectables and personal use assets – acquired before 1 July 2011 and transferred or sold to a related party before 1 July 2016 Transfer made at arm’s length pricethat is based on objective and supportable data
Collectables and personal use assets – acquired before 1 July 2011 and transferred or sold to a related party from 1 July 2016 Qualified independent valuer
Acquisition of an asset from a related party of the fund Acquired at market value that is based on objective and supportable data
Disposal of an asset to a related party of the fund Sale price should reflect a true market rate of return
Testing whether the market value of the SMSF’s in-house assetsexceeds 5% of the value of its total assets. Based on objective and supportable data
Determining the value of assets that support a super pension or income stream. Based on objective and supportable data

We recommend the use of a qualified independent valuer where the value of the asset represents a significant proportion of the fund’s value or the nature of the asset indicates that the valuation is likely to be complex.

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Collectables and personal use assets – questions and answers

Overview

 

On 1 July 2011 rules were introduced into the Superannuation Industry (Supervision) Act 1993 (SIS Act) for self-managed superannuation fund (SMSF) investments in collectables and personal use assets.

These rules took effect on 1 July 2011. They apply to all collectable and personal use asset investments made by SMSFs on or after that date. If your SMSF held an investment in a collectable or personal use asset prior to 1 July 2011, it has until 1 July 2016 to comply with the rules. This transitional period provides SMSF trustees with existing investments in collectables and personal use assets time to comply with the rules.

What are collectables and personal use assets?

Section 62A of the Superannuation Industry (Supervision) Act 1993 (SIS Act) provides that the regulations may make rules in relation to trustees of self-managed superannuation funds (SMSF) making, holding and realising investments involving collectables and personal use assets.

Regulation 13.18AA (1) specifies the assets that are taken to be collectables and personal use assets as:

  • artwork (within the meaning of the Income Tax Assessment Act 1997 (ITAA97))
  • jewellery
  • antiques
  • artefacts
  • coins, medallions or bank notes
  • postage stamps or first day covers
  • rare folios, manuscripts or books
  • memorabilia
  • wine or spirits
  • motor vehicles
  • recreational boats
  • memberships of sporting or social clubs.

Artwork is defined as a painting, sculpture, drawing, engraving or photograph, a reproduction of such a thing, or property of a similar description or use. Coins and bank notes are collectables if their value exceeds their face value. Spirits includes, but is not limited to, whiskey, gin, vodka, tequila, brandy and rum. Motor vehicles include, but are not limited to, motor cars and motor cycles.

So, what are the rules?

As previously noted, it is important to remember the rules do not replace or supersede any existing requirements imposed by superannuation law in respect of your fund’s investments. That is, your fund is still required to comply with all existing legislative requirements, including the sole purpose provisions.

To read more click here

 

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Self-managed super fund statistical report – September 2012

 

SMSF population table – annual data

This table contains details of the number of SMSFs that were established or wound up during each financial year. Establishment date is the date when an SMSF is deemed by the super law to come into existence and can be different from the date the SMSF registers with us.

Wind ups include both those initiated by trustees and those as a result of ATO compliance and cleansing activity. Those initiated by the trustees refer to the year the fund actually winds up rather than the date this advice is received by us. Net establishments are calculated as establishments less wind ups.

Total number of SMSFs is calculated as the number of SMSFs as at the end of the previous financial year plus net establishments for the financial year.

The number of members of SMSFs is estimated based on SMSF return form data, with the estimates for June 2012 extrapolated from 2010-11 data.

The data was extracted on 10 October 2012.

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
Establishments 30,548 23,049 24,575 45,666 31,614 32,586 29,913 33,139 36,270
Wind ups 4,757 5,052 4,999 4,612 6,018 8,582 14,699 5,108 994
Net establishments 25,791 17,997 19,576 41,054 25,596 24,004 15,214 28,031 35,276
Total number of SMSFs 271,515 289,512 309,088 350,142 375,738 399,742 414,956 442,987 478,263
Total members of SMSFs 523,990 558,887 593,591 668,011 712,917 759,271 792,827 846,227 913,550
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Audit Fee Quote

smsf-audit-fee-quote

Contact Us

Toll-Free: 1300 661 069
Phone: 03 9098 8658
Fax: 03 9746 6330

Melbourne
Level 40 140 William Street
Melbourne, VIC 3000

Postal Address:
PO Box 2050
Melton South VIC 3338

SMSF AUDIT
CPA-Public-Practice

SPAA Specialist Auditor

SPAA Specialist Auditor

Shiv Parihar is a SPAA accredited SMSF Specialist Auditor™. He provides SMSF auditing services independently, conflict free and in accordance with professional audit standards.