Self managed superannuation funds (“SMSF’s) are about strategy, and your strategy needs to be compliant with Superannuation Law. A sound SMSF strategy will ensure you achieve the maximum tax benefits for your fund and will improve your retirement balance in the long run. We have identified key strategies and compliance considerations for your in preparation for 30 June.
Be sure to take advantage of concessional contributions before 30 June. Contributions need to be credited to your SMSF bank account pre 30 June and ensure you have the relevant documentation to ensure the deduction is accepted by the ATO, this will include a Trustee resolution to accept the contribution.
If you are making a non-concessional contribution, check non-concessional contributions made during the previous two (2) financial years to see if the two-year bring forward provision has been triggered. For contribution caps click here.
Contributions can be covered in detail, be sure to consider contribution splitting, spouse contributions, salary sacrifice contributions amongst others.
2. Property Valuation
All SMSF assets need to be recorded at Market/ fair value in your financial statements each year. There are a few options to support market/fair value of a commercial or residential property in a SMSF. This will include an independent valuation or review of the rate notice. Generally the SMSF auditor will require sufficient appropriate audit evidence to support the valuation of the asset. The ATO has release “Valuation Guidelines for SMSF’s”. Given the attention on SMSF Property, be sure to support the valuation and existence of the property particularly if held under a Limited Recourse Borrowing Arrangements (“LRBA”).
3. SMSF Insurance
SMSF are required to consider insurance within the SMSF as part of the investment strategy of the fund. Ensure your investment strategy is up to date as well as your Trust Deed. Ensure your SMSF Insurance is held in the correct name.
4. Related Party Loans
There has been significant discussion over the last 12 months in relation to related party loans specifically the terms of the loan. The ATO has confirmed that zero interest rate loans are not allowed for LRBAs. You may believe that the ATO previously said it was OK however this won’t fly. The loan needs to be at a commercial rate to satisfy the arms length provisions of Superannuation Legislation. Also ensure loan repayments are made in accordance with the signed related party agreement.
5. Minimum pension payments
If you have an account-based pension for your SMSF, please ensure you have satisfied the minimum amount to be paid from your SMSF under Superannuation Law by 30 June 2014 to continue to receive tax exemptions. The minimum amount is determined by your age and the percentage value of your pension account balance at either the commencement date of the pension or 1 July each year.
For members under the age of 65 this will be at least 4%
6. Should I have a Corporate Trustee?
To my amazement, over 80% of SMSFs have an individual trustee structure. Redwood Advisory recommends corporate trustee for all our clients. There is a once off cost in setting up a company however the long-term benefit outweighs the cost, read more.
7. Be aware of ATO’s new powers for non-compliance
From 1 July 2013, where SMSF contraventions or non-compliance issues occur, the ATO has implemented a new Penalty Regime for SMSFs, Read more.
If you have a question in regards to setting up a SMSF or SMSF Strategies, please give Redwood Advisory a call on 1300 790 110 or email us at firstname.lastname@example.org .
Ivan Filipovic is a Director Redwood Advisory- SMSF Specialists.
The content has been prepared without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice.