SMSF Compliance & Legislation
New legislation was recently passed for the 2012/2013 tax year that will put further requirements on SMSF trustees. There are 4 key changes that the new regulations introduce:
• Insurance consideration as part of the Investment strategy – An insurance review for members is now required as part of the SMSF Investment strategy review.
• Regular reviews of the Investment strategy – This is now required by law however there is no guidance on what time length ‘regular’ means as yet.
• Keep money and assets of the fund separate to personal assets – This has always been a requirement however now its regulation, enforceable by the ATO. Ownership of assets should be structured and documented appropriately.
• Market valuation of assets – The ATO have been campaigning for Trustees to value assets of the fund at their ‘net market value’ as part of best practice. However this has since been overturned and now legislated to value assets at market value.
The ATO have also release the hit list of things they will be focusing on for SMSFs for the 2012/2013 financial year. This list includes:
• New SMSF trustees – will be randomly checked to ensure they understand the requirements of running a SMSF so that the fund has not just been established to illegally access funds.
• Contribution reporting – with all super funds, exceeding the contributions caps can bring with it additional tax. The ATO expects to send out 30,000 refund of excess concessional contributions offers.
• SMSF compliance with income tax obligations – this relates to ‘Exempt Current Pension Income (ECPI)’ and taking the required steps such as valuing assets at market value before starting payment of the pension.
• Commercial arm’s-length assets – The purchase & sale price of assets within the SMSF as well as income returns must always reflect the true market value.
• SMSF annual returns – while lodging a return is a requirement of operating a SMSF, there are a number of trustees that lodge the returns late or don’t even lodge one at all. The ATO intends on auditing over 1500 SMSFs who have never lodged a return to enforce them to either lodge the outstanding returns, or to wind up the SMSF.
The ATO have indicated that they will work with trustees to rectify small breaches however a serious breach can mean penalties such as fines, disqualification of the trustees and/or making a SMSF non-complying may apply.
When you join JBS as a SMSF client, you can be assured that we will keep you abreast of any new regulations that affect the way you are to run your SMSF to ensure that your fund remains compliant at all times.
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