As the trustee of a self-managed super fund, there are a number of rules and obligations that govern how you manage your fund.
The good news is that these obligations aren’t onerous—it’s just a matter of knowing what’s required.
Your Liston Newton SMSF tax adviser can provide expert advice on how to navigate your SMSF tax obligations.
The main SMSF tax obligations a trustee must uphold
As a trustee of your self-managed super fund, there are a number of key obligations that must be met to ensure SMSF compliance, otherwise you run the risk of facing harsh penalties imposed by the ATO.
Lodging your tax return
As the trustee of your SMSF, it’s your responsibility to ensure your fund submits an annual tax return to the ATO. This can be completed by your financial adviser.
Your fund's tax return should clearly state all necessary income tax information and member contributions. It must be audited, and any tax obligations associated with your fund need to be paid in full.
Completing an annual audit
SMSFs are required to undergo a yearly audit by an ASIC-approved independent auditor. This must be completed at least 45 days before the due date of the fund’s annual tax return. In this audit, the auditor examines and analyses the fund’s financial statements, and assesses its compliance against Australian superannuation law. All instances of non-compliance are reported to the trustee and the ATO.
Paying your annual supervisory levy
All SMSFs pay the ATO an annual supervisory levy, which currently sits at $259. It’s important to note that this levy is paid in advance, so SMSFs in their first year of operation are required to pay double this amount.
Are you using SuperStream?
As your SMSF’s trustee, it’s your responsibility to ensure that all employer superannuation guarantee contributions made on behalf of members are paid via SuperStream. SuperStream is the ATO’s superannuation payment system.
Common SMSF tax mistakes
Your SMSF isn’t sole purpose
To ensure SMSF compliance, your fund must meet the sole purpose test, which means your fund is maintained for the key purpose of:
- Member retirement benefits;
- Death benefits; or
- At least one of these core benefits, plus one or more ancillary benefit, such as resignation or disability benefit.
A breach of this test can result in your SMSF becoming non-compliant, and significant penalties apply.
Failing to submit your tax return on time
A key SMSF tax obligation is lodging your annual tax return on time. As the trustee of an SMSF it’s your responsibility to ensure this happens. The due date is typically 28 February the following financial year. Failure to lodge your tax return by this time can result in penalties, and the loss of your SMSF tax concessions.
Paying SMSF-related expenses from the wrong bank account
Your SMSF bank account and assets must be separate from your individual bank account, or those of its members. If at any point SMSF-related expenses are paid from other bank accounts, it’s important to notify the ATO as soon as possible, to ensure proper compliance is followed. Failure to do so can result in penalties and the loss of SMSF tax concessions.
Providing loans or financial assistance to SMSF members
Under no circumstances is money from your SMSF to be used for any purpose other than acting as your superannuation fund. This contravenes strict SMSF compliance regulations. Like the other common mistakes, this can result in penalties and loss of tax concessions.
The result of non-compliance
The ATO has a number of steps it takes to address non-compliance in SMSF trustees, including:
- Education direction to ensure proper knowledge of SMSF practices
- Administrative fines
- Rectification direction to ensure the issue is adequately resolved
- Disqualification of the trustee
- Civil and criminal penalties
- Notice of non-compliance, which removes the SMSF tax concession. Your tax rate then rises to the highest marginal tax rate, and all tax concessions granted in previous years are paid back to the ATO.
But remember: mistakes happen
Despite the strict nature of adhering to your SMSF tax obligations, it’s important to remember that mistakes can happen. You might accidentally make a payment using the wrong account, or a member may access your fund in error.
In these circumstances, you can work with your accountant to resolve any errors directly with the ATO. This ensures it doesn't become an issue, and you can rectify the error as soon as possible.
The most important thing for trustees to remember
The most important thing for trustees is to remember to be active in the management of their SMSF. This means you must communicate with your accountant to ensure you stay compliant with the ATO, and remain up to date with any new regulation.
You don’t need to know every law, your accountant is there to advise on the legal aspects of your fund. But you shouldn’t be completely hands-off—it’s called a ‘self-managed’ superannuation fund for a reason.
To stay in control of your funds, it’s a good idea to meet with your SMSF accountant at least once a year to review your SMSF tax obligations. This allows you to keep aware of any changes in the market, and any new obligations required of SMSF trustees.
As a trustee, you and your adviser should continually reassess the circumstances of your fund, and its members, and respond accordingly. This includes:
- Regularly reviewing and amending your trust deed, investment strategy, and investment portfolio.
- Revisiting members’ personal circumstances (such as bankruptcy, overseas travel, loss of mental capacity, or relationship breakdown between members of the fund) and understanding the impact of these on the fund.
- Monitoring members’ retirement plans and understanding what will change when one or more members are ready to retire.