SMSF Audit

Practical Compliance Guidelines LRBA 2016/15

Income tax - arm's length terms for Limited Recourse Borrowing Arrangements established by self managed superannuation funds

What this Guideline is about

1. When a Self-Managed Superannuation Fund (SMSF) acquires an asset under a Limited Recourse Borrowing Arrangement (LRBA), the non-arm’s length income (NALI) provisions in section 295-550 of the Income Tax Assessment Act 1997 (ITAA 1997) may apply to ordinary or statutory income generated from the asset if the terms of the LRBA are not consistent with an arm’s length dealing.

2. This Guideline sets out the ‘Safe Harbour’ terms on which SMSF trustees may structure their LRBAs consistent with an arm’s length dealing. That is, for income tax compliance purposes, the Commissioner accepts that an LRBA structured in accordance with this Guideline is consistent with an arm’s length dealing and that the NALI provisions do not apply purely because of the terms of the borrowing arrangement.

3. As noted under the Date of effect, this Guideline applies where the requirements of section 67A (or former subsection 67(4A) if applicable) of the Superannuation Industry (Supervision) Act 1993 (SISA) are met at all times, and are not intended to override or replace those or any other SISA requirements that apply.

4. If SMSF trustees have entered into an arrangement which does not meet all of the ‘Safe Harbour’ terms set out in this Guideline, whilst the trustees are unable to be assured that the Commissioner will accept the arrangement to be consistent with an arms’ length dealing, it does not mean that the arrangement is deemed not to be on arms’ length terms. It merely means that there is no certainty provided under this Guideline. The trustees will need to be able to otherwise demonstrate that the arrangement was entered into and maintained on terms consistent with an arms’ length dealing. One example of how a trustee may demonstrate this is by maintaining evidence that shows their particular arrangement is established and maintained on terms that replicate the terms of a commercial loan that is available in the same circumstances.

Date of effect

5. This Guideline applies to SMSF trustees who have established LRBAs that meet the requirements of section 67A (or former subsection 67(4A) if applicable) of the SISA, regardless of whether the arrangement commenced before or after the date of publication of this Guideline.

Safe Harbour 1: The asset acquired is real property

6. Safe Harbour 1 applies when an SMSF uses an LRBA to acquire real property or to refinance a borrowing used to acquire real property, whether that property is residential or commercial premises (including property used for primary production activities).

7. The ATO accepts that an LRBA used to acquire real property, or to refinance a borrowing used to acquire real property, is consistent with an arm’s length dealing if the terms of the borrowing are established and maintained throughout the LRBA as set out below.

Interest Rate Reserve Bank of Australia Indicator Lending Rates for banks providing standard variable housing loans for investors. Applicable rates:

For the 2015-16 year, the rate is 5.75%
For the 2016 17 and later years, the rate published for May (the rate for the month of May immediately prior to the start of the relevant financial year)
Fixed / variable Interest rate may be variable or fixed

Variable – uses the applicable rate (as set out above) for each year of the LBRA
Fixed – trustees may choose to fix the rate at the commencement of the arrangement for a specified period, up to a maximum of 5 years.

The fixed rate is the rate published for May (the rate for the May before the relevant financial year).

The 2015-16 rate of 5.75% may be used for LRBAs in existence on publication of these guidelines, if the total period for which the interest rate is fixed does not exceed 5 years (see ‘Term of the loan’ below)

Term of the loan Variable interest rate loan (original) – 15 year maximum loan term (for both residential and commercial)Variable interest rate loan (re-financing) – maximum loan term is 15 years less the duration(s) of any previous loan(s) relating to the asset (for both residential and commercial)

Fixed interest rate loan – a new LRBA commencing after publication of these guidelines may involve a loan with a fixed interest rate set at the beginning of the arrangement. The rate may be fixed for a maximum period of 5 years and must convert to a variable interest rate loan at the end of the nominated period. The total loan term cannot exceed 15 years.

For an LRBA in existence on publication of these guidelines, the trustees may adopt the rate of 5.75% as their fixed rate, provided that the total fixed-rate period does not exceed 5 years. The interest rate must convert to a variable interest rate loan at the end of the nominated period. The total loan cannot exceed 15 years.

Loan to Market Value Ratio (LVR) Maximum 70% LVR for both commercial and residential propertyIf more than one loan is taken out to acquire (or refinance) the asset, the total amount of all those loans must not exceed 70% LVR.

The market value of the asset is to be established when the loan (original or re-financing) is entered into.

For an LRBA in existence on publication of these guidelines, the trustees may use the market value of the asset at 1 July 2015.

Security A registered mortgage over the property is required
Personal guarantee Not required
Nature & frequency of repayments Each repayment is of both principal and interestRepayments are monthly
Loan agreement A written and executed loan agreement is required

Safe Harbour 2: The asset acquired is a collection of stock exchange listed shares or units

8. Safe Harbour 2 applies when an SMSF uses an LRBA to acquire a collection of shares in a stock exchange listed company or to acquire units in a stock exchange listed unit trust. Safe Harbour 2 also applies when an SMSF uses an LRBA to refinance a borrowing used to acquire such a collection.

9. The ATO accepts that an LRBA used to acquire or to refinance a borrowing used to acquire stock exchange listed shares or stock exchange listed units in a unit trust is consistent with an arm’s length dealing if the terms of the borrowing are established and maintained throughout the LRBA, as set out below.

Interest Rate Reserve Bank of Australia Indicator Lending Rates for banks providing standard variable housing loans for investors plus 2%. Applicable rates:

For the 2015-16 year, the interest rate is 5.75% + 2% = 7.75%
For the 2016-17 and later years, the rate published for May plus 2% (the rate for the May before the relevant financial year)
Fixed / variable Interest rate may be variable or fixed

Variable – uses the applicable rate (as set out above) for each year of the LBRA
Fixed – trustees may choose to fix the rate at the commencement of the arrangement for a specified period, up to a maximum of 3 years (see ‘Term of the loan’ below). The fixed rate is the rate for May plus 2% (the rate for the May before the relevant financial year)

The 2015-16 rate of 7.75% may be used for LRBAs in existence on publication of these guidelines, if the total period for which the interest rate is fixed does not exceed 3 years (see ‘Term of the loan’ below)

Term of loan Variable interest rate loan (original) – 7 year maximum loan termVariable interest rate loan (re-financing) – maximum loan term is 7 years less the duration(s) of any previous loan(s) relating to the collection of assets

Fixed interest rate loan – a new LRBA commencing after publication of these guidelines may involve a loan that has a fixed interest rate set at the beginning of the arrangement. The rate may be fixed up to for a maximum of 3 years, and must convert to a variable interest rate loan at the end of the nominated period. The total loan term cannot exceed 7 years.

For an LRBA in existence on publication of these guidelines, the trustees may adopt the rate of 7.75% as their fixed rate, provided that the total period of the fixed rate does not exceed 3 years. The interest rate must convert to a variable interest rate loan at the end of the nominated period. The total loan cannot exceed 7 years.
LVR Maximum 50% LVRIf more than one loan is taken out to acquire (or refinance) the collection of assets, the total amount of all those loans must not exceed 50% LVR.

The market value of the collection of assets is to be established when the loan (original or re-financing) is entered into.

For an LRBA in existence on publication of these guidelines, the trustees may use the market value of the asset at 1 July 2015.

Security A registered charge/mortgage or similar security (that provides security for loans for such assets)
Personal guarantee Not required
Nature & frequency of repayments Each repayment is of both principal and interestRepayments are monthly
Loan agreement A written and executed loan agreement is required

More information

10. For more information see:

·
Self Managed Superannuation Funds Ruling SMSFR 2012/1 Self Managed Superannuation Funds: limited recourse borrowing arrangements – application of key concepts
·
Limited Recourse borrowing arrangements – questions and answers
·
Legislative Determinations SPR 2014/1 Self Managed Superannuation Funds (Limited Recourse Borrowing Arrangements – In-house Asset Exclusion) Determination 2014
·
SISA 1993 67A and SISA 1993 67B of the SISA
·
ATO Interpretative Decision ATO ID 2015/27 Income tax: non-arm’s length income – related party non-commercial limited recourse borrowing arrangement to acquire listed shares
·
ATO Interpretative Decision ATO ID 2015/28 Income tax: non-arm’s length income – related party non-commercial limited recourse borrowing arrangement to acquire real property

Background and Additional Information

11. As set out in ATO interpretative decisions, ATO ID 2015/27 and ATO ID 2015/28, the ATO takes the view that the NALI provisions in the ITAA 1997 can apply when an SMSF trustee undertakes LRBAs that are established or maintained on terms that are not consistent with an arm’s length dealing.

12. If we are asked to state formally (for example, in a private ruling or in litigation) whether a particular SMSF’s LRBA gives rise to NALI for any income year, our approach will be consistent with ATO ID 2015/27 and ATO ID 2015/28.

ATO’s compliance approach for LRBAs established before 30 June 2016

13. The ATO recognises the effects of the NALI provisions, and the importance of preserving assets held by an SMSF. Given this, we will not select an SMSF for an income tax review for the 2014-15 year or earlier years purely because the SMSF has entered into an LRBA. However, this is conditional on the SMSF trustee ensuring that any LRBAs that their fund has is on terms consistent with an arm’s length dealing by 30 June 2016 or, alternatively, is brought to an end by 30 June 2016.

14. In addition, payments of principal and interest for the year ended 30 June 2016 must be made under LRBA terms consistent with an arm’s length dealing. SMSF trustees who are concerned about their ability to make the required payments on commercial terms before 30 June 2016 can contact the ATO to discuss their particular circumstances. In the first instance, taxpayers can write to us, outlining their particular circumstances, at the following address:

PO Box 3100
Penrith NSW 2740

15. In other words, SMSF trustees have an opportunity to review the terms of their funds’ LRBAs before 30 June 2016. The terms of their LRBAs will not be subject to any further compliance action for the 2014-15 income years (or before) if, by the 30 June 2016:

(i)
the LRBA is on terms that are consistent with an arm’s length dealing,
or
(ii)
the LRBA is brought to an end, and the payments of principal and interest made are made under LRBA terms consistent with an arm’s length dealing.

16. Furthermore, SMSF trustees who satisfy these conditions, and apply this Guideline in good faith to revise the terms of their existing LRBAs before 30 June 2016, can be assured that the terms of their LRBA will not be subject to any further compliance action by the ATO for the 2014-15 years and prior.

17. The following examples illustrate how the Safe Harbours apply in conjunction with the opportunity for SMSF trustees to review and revise the terms of their LRBAs before 30 June 2016.

Example 1 – real property

18. A complying SMSF borrowed money under an LRBA on terms consistent with section 67A of the SISA. It used the funds to to acquire commercial property valued at $500,000 on 1 July 2011.

·
The borrower is the SMSF trustee.
·
The lender is an SMSF member’s father (a related party).
·
A holding trust has been established, and the holding trust trustee is the legal owner of the property until the borrowing is repaid.

19. The loan has the following features:

·
the total amount borrowed is $500,000
·
the SMSF met all the costs associated with purchasing the property from existing fund assets
·
the loan is interest free
·
the principal is repayable at the end of the term of the loan, but may be repaid earlier if the SMSF chooses to do so
·
the term of the loan is 25 years
·
the lender’s recourse against the SMSF is limited to the rights relating to the property held in the holding trust, and
·
the loan agreement is in writing.

20. We do not consider that this LRBA has been established or maintained on arm’s length terms. This is consistent with our view in ATO interpretative decisions, ATO ID 2015/27 and ATO ID 2015/28. The income earned from the property, which is rented to an unrelated party, gives rise to NALI.

21. At 1 July 2015, the property was valued at $643,000.

22. The SMSF has not repaid any of the principal since the loan commenced.

23. To avoid having to report NALI for the 2015-16 year (and prior years) the Fund has a number of options.

Option 1 – Alter the terms of the loan to meet guidelines

24. The SMSF and the lender could alter the terms of the loan arrangement to meet Safe Harbour 1, for real property (see paragraph 7 of this guideline).

25. To bring the terms of the loan into line with Safe Harbour 1, the trustees of the SMSF must ensure that:

·
The 70% LVR is met (in this case, the value of the property at 1 July 2015 may be used). Based on a property valuation of $643,000 at 1 July 2015, the maximum the SMSF can borrow is $450,100. The SMSF needs to repay $49,900 of principal as soon as practical before 30 June 2016.
·
The loan term cannot exceed 11 years from 1 July 2015. The SMSF must recognise that the loan commenced 4 years earlier. An additional 11 years would not exceed the maximum 15 year term.
·
The SMSF can use a variable interest rate. Alternatively, it can alter the terms of the loan to use a fixed rate of interest for a period that ensures the total period for which the rate of interest is fixed does not exceed 5 years. The loan must convert to a variable interest rate loan at the end of the nominated period.
·
The interest rate of 5.75% p.a. applies from 1 July 2015 to 30 June 2016. The SMSF trustee must determine and pay the appropriate amount of principal and interest payable for the year. This calculation must take the opening balance of $500,000, the remaining term of 11 years, and the timing of the $49,900 capital repayment, into account.
·
After 1 July 2016, the new LRBA must continue under terms complying with the ATO’s guidelines relating to real property at all times. For example, the SMSF must ensure that it updates the interest rate used for the loan on 1 July each year (if variable) or as appropriate (if fixed), and make monthly principal and interest repayments accordingly.

Option 2 – Refinance through a commercial lender

26. The fund could refinance the LRBA with a commercial lender, extinguish the original arrangement and pay the associated costs.

27. While the original loan remains in place during the 2015-16 income year, the SMSF must ensure that the terms of the loan are consistent with an arm’s length dealing, and relevant amounts of principal and interest are paid to the original lender.

28. The SMSF may choose to apply the terms set out under Safe Harbour 1 to calculate the amounts of principal and interest to be paid to the original lender for the relevant part of the 2015-16 year.

Option 3 – Pay out the LRBA

29. The SMSF may decide to repay the loan to the related party, and bring the LRBA to an end before 30 June 2016.

30. While the original loan remains in place during the 2015-16 income year, the SMSF must ensure that the terms of the loan are consistent with an arm’s length dealing, and the relevant amounts of principal and interest are paid to the original lender.

31. The SMSF may choose to apply the terms set out under Safe Harbour 1 to calculate the amounts of principal and interest to be paid to the original lender for the relevant part of the 2015-16 year.

Example 2 – collection of listed shares

32. A complying SMSF borrowed money under an LRBA on terms consistent with section 67A of the SISA. It used the funds to acquire a collection of stock exchange listed shares valued at $100,000 on 1 July 2011.

·
The borrower is the SMSF trustee.
·
The lender is an SMSF member (a related party).
·
A holding trust has been established, and the holding trust trustee is the legal owner of the collection of shares until the borrowing is repaid.

33. The loan has the following features:

·
the total amount borrowed is $80,000
·
the SMSF met all the costs associated with purchasing the shares, and provided $20,000 from existing fund assets towards the purchase price
·
interest was payable, but only at a fixed rate of 2% p.a. for the entire term of the loan
·
the principal is repayable at the end of the term of the loan, but may be repaid earlier if the SMSF chooses to do so
·
the term of the loan is for 10 years
·
the lender’s recourse against the SMSF is limited to the rights relating to the collection of shares held in the Holding Trust, and
·
the loan agreement is in writing.

34. We do not consider that this LRBA has been established or maintained on arm’s length terms. This is consistent with our view in ATO interpretative decisions: ATO ID 2015/27 and ATO ID 2015/28. The dividend income earned from these shares gives rise to NALI.

35. As at 1 July 2015, the parcel of shares was valued at $120,000.

36. The SMSF has not repaid any of the principal since the loan commenced.

37. To avoid having to report NALI for the 2015-16 year (and prior years) the Fund has a number of options.

Option 1 – Alter the terms of the loan to meet guidelines

38. The SMSF and the related party could alter the terms of the loan to comply with Safe Harbour 2, for a collection of stock exchange listed shares (see paragraph 8 of this guideline).

39. To bring the terms of the loan into line with Safe Harbour 2, the trustees of the SMFS must ensure that:

·
The 50% LVR is met (in this case the value of the collection of shares at 1 July 2015 may be used). Based on a market valuation of $120,000 at 1 July 2015, the maximum the SMSF can borrow is $60,000. The SMSF needs to repay $20,000 of principal as soon as practical before 30 June 2016.
·
The loan term cannot exceed 3 years from 1 July 2015. The SMSF must recognise that the loan commenced four years earlier. An additional three years would not exceed the maximum 7 year term.
·
The interest rate must be a variable interest rate, as the loan has already been fixed for 4 years from when it commenced (that is, 1 July 2011).
·
The interest rate of 7.75% p.a. applies from 1 July 2015 to 30 June 2016. The related party and the SMSF must determine the appropriate amount of principal and interest payable for the year. This calculation must take the opening balance of $80,000, the remaining term of three years, the timing of the $20,000 capital repayment, and the interest already paid into account.
·
After 1 July 2016, the new LRBA must continue under terms complying with the ATO’s guidelines relating to listed shares at all times. For example, the SMSF must ensure that it updates the interest rate used for the loan on 1 July each year, and make monthly principal and interest repayments accordingly.

Option 2 – Refinance through a commercial lender

40. The SMSF could refinance the LRBA with a commercial lender, extinguish the original arrangement and pay the associated costs.

41. While the original loan remains in place during the 2015-16 income year, the SMSF must ensure that the terms of the loan are consistent with an arm’s length dealing, and that principal and interest amounts are paid to the original lender for the relevant parts of the 2015-16 year.

42. The SMSF may choose to apply the terms set out in Safe Harbour 2 to calculate the amounts of principal and interest to be paid to the original lender for the relevant part of the 2015-16 year.

Option 3 – Payout the LRBA

43. The SMSF may decide to repay the loan to the related party, and bring the LRBA to an end before 30 June 2016.

44. While the original loan remains in place during the 2015-16 income year, the SMSF must ensure that the terms of the loan are consistent with an arm’s length dealing, and the relevant amounts of principal and interest for that period are paid to the original lender.

45. The SMSF may choose to apply the terms set out in Safe Harbour 2 to calculate the amounts of principal and interest to be paid to the original lender for the relevant part of the 2015-16 year.

Commissioner of Taxation
6 April 2016

For More information on ATO website click here.

Related Rulings/Determinations:
SMSFR 2012/1

Legislative References: ITAA 1997ITAA 1997 295-550SISA 1993SISA 1993 67ASISA 1993 67(4A)SISA 1993 67B

Other References:
ATO ID 2015/27
ATO ID 2015/28
SPR 2014/1

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ATO SMSF news

Limited recourse borrowing arrangements – questions and answers

This document provides general information about our current views on issues that trustees of self-managed super funds (SMSFs) may need to take into account when considering entering into a limited recourse borrowing arrangement (LRBA). It also provides guidance regarding the application of the Superannuation Industry (Supervision) Act 1993 (SISA), and related super rules to such arrangements.

This document does not deal with tax issues other than general references when discussing the application of the super law.

For more information click here for ATO link

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SMSF auditors

AS per ATO  :

SMSF auditors

The super laws require that SMSFs have their accounts, statements and compliance audited each year. The fund’s trustees are responsible for appointing you and must provide you with all the documents you need to do the audit.

As an SMSF auditor, it is your role to carry out a financial and compliance audit of the fund’s operation.

You must audit funds in accordance with super law and regulations and various codes of practice.

Your audit provides an opinion on the status of the fund, including your professional assessment of its compliance. You need to report your findings (in writing) to the trustees, using the form we provide, highlighting any financial and compliance issues.

 

for further information please following the link:

https://www.ato.gov.au/Super/Super-professionals/SMSF-auditors/

 

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