There have been numerous changes to the superannuation sector in recent time and more specifically to how SMSFs are administered. It can be very difficult for trustees to stay up to date with changes and manage them effectively. We always aim to keep things simple for our clients. For those of you who like to stay updated and in touch with everything regarding self managed superannuation we have put together a list of recent changes to the industry and areas to avoid.

 1.       Transfer your share before 30 June 2013

As mentioned in a previous article, the Government plans to ban the off-market (in specie) transfer of shares into SMSF. This change was recommended by the Cooper Review in 2010 and should be passed by parliament shortly. For more information see Last chance to transfer shares into Super.

 2.       How to value investmentschanges to SMSFs

From 1 July 2012 SMSFs are required to value the investments at market value, not historical value. This means that independent valuations will be required for investment properties every year.

 3.       Keeping personal money separate from SMSF

This issue is not new; however, the ATO will be taking extra steps to make sure breaches do not occur. The best way to avoid mixing assets up is to set your SMSF up with a company as trustee. The company does not trade and for the peace of mind and simplicity it may be a small cost to pay to ensure the smooth running of your SMSF.

 4.        Underpaying your pension

When a member’s balance in an SMSF is in pension phase, the member is required to draw and minimum pension to achieve the tax-free earnings status. If an SMSF fails to meet the minimum pension requirement the fund will lose the tax free exemption.  Now as part of the end of financial year tax return, the ATO is requiring trustees to indicate whether the minimum pension is met.

The ATO has indicated concessions will be available if the pension is underpaid by 1/12th; however, anything less could result in non-compliance.

 5.       Have you considered Life Insurance

It is now a requirement that trustees have conceded Life Insurance as a part of the overall investments strategy. It must be documented that the trustees understand the importance of Life Insurance and that an assessment has been made of what type and level of cover members need.

 6.       New Penalty System

The ATO has now greater powers to impose penalties to SMSF trustees that breach the SIS Act. This avoids the commissioner needing to go to the courts to impose penalties. The ATO can now imposed penalties at time the regulations are breached.

For minor breaches trustees can now be sent back to ‘school’ and be required to undertake further education to ensure the breach does not happen again.

For more serious breaches the ATO measures penalties in units. The cost of a standard unit has now increased to $170 per trustee. A common breach which carries 10 penalty units is the failure to document SMSF decisions and activities. This is why advice can be so important and also provides another argument for an SMSF to have a corporate trustee.  Remember each penalty unit is per trustee, therefore two individual trustee means double the points, double the fine. 

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Thomas Jacks BCom (Acc), SMSF SpecialistTM, Adv. Dip F.S. (FP)
“I want to be able to assist clients with their investment and retirement planning by providing real strategy advice. It’s my aim to not only help my clients but to educate them by addressing the entire picture” Google Plus

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