SMSF health check – ensuring you comply by 30 June 2013

08 May 2013 Topics: Superannuation

In light of the substantial changes within the superannuation sector, self-managed superannuation fund (SMSF) trustees should review their existing arrangements to ensure they fully comply with existing and proposed amendments to the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994 (SIS legislation) from 1 July 2013.

In particular, SMSF trustees should:

Rectify any outstanding compliance issues by 30 June

From 1 July 2013, administrative penalties will automatically apply to various breaches under the SIS legislation and can be up to $10,200 for each trustee.

Consider a corporate trustee

Under the new administrative penalty regime, each individual trustee may have to pay the penalty amount whereas only the company must pay the penalty for  a corporate trustee. For example, if the trustees failed to ensure accounts are prepared for a financial year, then 10 penalty units and $1,700 is imposed on each individual trustee. If the fund has a corporate trustee, the penalty (10 penalty units and $1700) is imposed upon the body corporate only.

New SIS regulation 4.09A requires SMSF trustees to keep money and other assets of the fund separate to personal assets. Along with other benefits of having a corporate trustee (such as advantages on the death of a member), SMSF trustees should seriously consider a sole purpose trustee company to comply with the SIS regulation and to avoid the risk of significant administrative penalties being imposed for inadvertent breaches.

Consider enduring powers of attorney

Apart from ensuring your affairs are looked after if you cannot act, this simple document can avoid compliance issues for the fund and avoid unfixable problems if a member loses capacity.

Review and update your trust deed to account for any major strategies

If you are considering borrowing, binding nominations, commencing a pension, taking insurance or undertaking any major strategy for your SMSF, you should consider whether your trust deed needs updating to allow for the transaction.

Review and update your investment strategy

SIS regulation 4.09 requires the trustee to regularly review the investment strategy. The investment strategy must now also consider insurance for one or more members of the fund, along with the usual considerations such as risk, composition of investments, liquidity of investments and ability to discharge liabilities.

You should also update your investment strategy if you are considering undertaking any new investment activities for the next financial year.

Ensure that all assets are valued at market value

For the 2012-13 financial year and onwards, assets must be valued at market value when preparing the annual accounts and statements. SMSF trustees should ensure that all relevant factors and considerations are taken into account when valuing the asset, including acting in good faith and having a rational and reasonable process. Trustees must be able to explain the value to a third party or will breach SIS regulation 8.02B.

Ensure that you have made your minimum pension payments

The ATO currently takes the view that if you do not make your minimum pension payments for the year, the pension ceases for the whole of that financial year. The ATO has indicated it will allow a small underpayment (up to 1/12th of the pension value) in limited circumstances. SMSF trustees should review their pension payments and ensure they have made the required minimum amount.

Ensure any related party transactions comply with the proposed rules regarding acquisitions and disposals

From 1 July 2013, there are restrictions on acquiring or disposing of assets from related parties.
In particular, it is highly likely that listed securities must be acquired or disposed of ‘on market’ and trustees will no longer be able to prepare off market transfers (except in relation to a change in trustee).

For more information, please click on the hyperlinks in this alert or the articles listed below, or contact a member of our team.

Why every member of a SMSF should have an enduring power of attorney.

ATO partially clarifies whether a pension ceases if minimum pension requirements are not met.

Government announces more changes to superannuation: How will the new rules on taxation of pension income, contribution caps and excess contributions affect you?

Superannuation – new regime for punishing SMSF trustees.

SMSFs: ownership and separation of assets – is a sole purpose trustee company the only option?



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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.