The ATO published a list of the most common mistakes made in the accounting process of SMSFs around the country last year.
A few of the top five mistakes relate to the SMSF Annual Return (SAR) which is required to be lodged for some SMSFs next month.
With recent growth of 15% in SMSF’s for the first time in five years and the SAR period approaching, it’s probably timely to review the compliance issues commonly tripping up Aussie trustees.
Mistake #1: Using a bank account that isn’t unique to the SMSF
The ATO has highlighted that an independent bank account is set up in the fund’s name to accept contributions, rollovers of super and income from the fund’s investments.
The account must be separate from the trustees’ individual bank accounts, as well as any related employers’ or advisers’ bank accounts.
“This will protect your fund’s assets and ensure super payments can be made to your SMSF,” the ATO said.
Mistake #2: Providing an incorrect electronic service address (ESA)
An Electronic Service Address (ESA) is required for an SMSF to receive electronic remittance advice and contributions if it has members receiving super from non-related employers.
The ATO has stated that many trustees mistakenly provide an email address or the contact details of the SMSF messaging provider.
“An ESA consists of alphanumeric characters with a combination of upper and lower-case characters and is case sensitive,” the Tax Office said.
Mistake #3: Not valuing an SMSF’s assets at market value for the Superannuation Annual Return (SAR)
The Tax Office states that SMSF assets need to be calculated at market value as of 30 June to prepare the fund’s accounts, statements and SAR.
Accurate asset valuation is important to maintain a compliant status for your SMSF. Penalties may apply for inaccurate valuations as these can have an impact on members’ balances.
“If you follow our valuation guidelines, we’ll generally accept the valuation you provide,” the ATO said.
The Tax Office states that SMSF assets need to be calculated at market value as of 30 June to prepare the fund’s accounts, statements and SAR.
Accurate asset valuation is important to maintain a compliant status for your SMSF. Penalties may apply for inaccurate valuations as these can have an impact on members’ balances.
“If you follow our valuation guidelines, we’ll generally accept the valuation you provide,” the ATO said.
Mistake #4: Trying to lodge with zero assets
The ATO said an SMSF is not legally established until the fund has assets set aside for the benefit of members.
As a result, the regulator said it won’t accept a SAR from an SMSF that has no assets unless the fund is being wound up.
“If this is your SMSF’s first year and you have no assets set aside for the benefit of members, you can ask us to either cancel your fund’s registration or flag the SMSF’s record as return not necessary (RNN),” it said.
Mistake #5: Lodging an SAR without auditor details
An approved auditor examines an SMSF’s financial statements and assesses the fund’s compliance with super law, meaning an audit must be completed before your SAR can be lodged, according to the ATO.
“A SAR lodged without auditor’s details will be suspended and not recognised as a lodgment. This will impact the complying status of the fund until the SAR is lodged with the required information,” the ATO said.
“Appoint an auditor at least 45 days before your SAR is due to ensure the audit is completed in time to meet the lodgment date.”
This means this year, it is advised that you have an auditor appointed by April 1.
If you’re in need of assistance, Intello provides efficient specialist SMSF Accounting for self-directed trustees. Call the team on 1300 362 943 during business hours or email anytime.