What SMSFs can expect from the 2011-12 compliance program

ATO Commissioner Michael D’Ascenzo launched the ATO’s new SMSF compliance program on 30 June 2011. While ATO continue to work with SMSFs to fix genuine problems, ATO also take firm action, including making funds non-complying, if they commit serious breaches of the rules. This year, ATO SMSF compliance activity will focus on: 

• newly registered funds, to ensure they have not been established to provide illegal early release (IER) of super funds to their members
• funds lodging their first annual return to ensure they are entitled to receive their ‘notice of compliance’
• auditor contravention reports
• related-party investments, to ensure they are not contravening the 5% in-house asset limit or the prohibition of lending to members
• exempt current pension income and non-arm’s length income
• re-reporting of contributions and compliance with excess contributions tax release authorities.

Sections within What SMSFs can expect from the 2011-12 compliance program

• Illegal early release
• Approved auditors

Self Managed Super funds why use Market Valuations

Australian Taxation Office Superannuation Circular 2003/1

Introduction1. The Australian Taxation Office (ATO) intends that self managed superannuation funds should use market values for all valuation purposes. This includes valuations for determining the purchase price of a pension and the use of market value accounting for all financial statements.2. The purpose of this Circular is to provide the basis for conducting these valuations.

Financial reporting

3. Australian Accounting Standard AAS 25 which applies to reporting entities requires superannuation funds to value their assets at their net market value as at the reporting date. However, most self managed superannuation funds can appropriately be classified as non-reporting entities and therefore not required to comply with this standard.

4. Regardless of this, the Tax Office’s position is that self managed superannuation funds should use market value reporting for their financial statements, even where the auditor has determined that the fund is a non-reporting entity.

5. This view is shared [BH1]by APRA and is set out in their Addendum to Circular No. IV.A.4.

Benefits of market value financial reporting

6. By using market value reporting, self managed superannuation funds will ensure that members’ benefits, as reported in the annual statements, will reflect all market value movements of the reporting period.

7. This consistent accounting approach by all superannuation funds will assist trustees with the investment decisions of the fund by allowing for the comparison of financial statements from subsequent periods and with other superannuation funds. It will also assist trustees to determine whether the mix of investments in the fund is in accordance with the investment strategy.

8. Market value reporting will also allow trustees to easily determine the resources that the fund has available for payment of benefits. For example, if a member was to leave the fund the trustees could easily determine the member’s account balance as at the reporting date.

To read more click here