Superannuation funds are an integral part of most Australian’s retirement plans. Superannuation is a guaranteed amount of money you get once you reach retirement, which is paid by your employers. For many Australians, superannuation is the only form of retirement plan available, so they want to have full control over their super funds. And that’s where the concept of self-managed super funds SMSF audit Checklist.

In a self-managed super fund, you, along with other trustees, can manage everything about your superannuation. From retirement age to rate and minimum investment, everything can be decided by you and the small group of people in the same fund as you. 

However, since this is more technical than traditional superannuation providers, you need to follow a stringent set of rules. The Seld-managed super funds’ audit or SMSF audit is used to determine whether your super funds are in compliance with the standard rules and regulations. 

In order to make your SMSF audit as smooth as it gets, we’ve made an SMSF audit checklist to help you out. In this article, we’ve mentioned a few things you must do before your SMSF audit for an amazing experience. Let’s begin!

SMSF Audit Checklist:

Make Sure the Trust Deed is Done Properly:

Generally, there are two types of self-managed super funds. Either you’re in a corporate plan where the company is your trustee. The recipients are directors to the fund, or you’re in an individual trustee based superannuation where you’re the trustees. There’s no company involved in the process.

Whatever your superannuation plan might be, you have to make sure it’s updated. If there are any changes to the list of trustees, or any changes have been made to the plan from the previous fiscal year, you have to update it before the audit. Otherwise, you’ll have to deal with a fair bit of legal hassle.

Furthermore, you’d also need an individual representation letter from each trustee with their signatures. This is taken to ensure all the trustees are on the same page. So, make sure you have all the trustees on the same page before the audit. For this reason, this is the first part of your SMSF audit checklist.

The Declared Retirement Age is Coherent:

One of the most significant advantages of a self-managed super fund is that you can declare your retirement age. Since you’re in charge of your superannuation funds along with a small number of trustees, you are in full control of the decisions you’ll take. 

However, all the trustees must comply with the decisions for them to take effect. And since one of the most critical decisions is at what age the funds will be accessible, it’s important that everyone’s on the same page about the age. For this reason, it’s important to submit signed declarations of retirement age from all the trustees. 

Prepare Financial Documents:

Your superannuation funds are provided by your employer. Your employer will pay a part of your income in your superannuation fund. For this reason, you need to provide a document for your income.

You have to provide a document showing how much money you’ve made in that fiscal year and how much of it has been transferred to your superannuation funds. Income from work, investments, and properties are all taken into account, so you and your trustees need to provide all these documents.

Submit Documents for your assets:

What assets you own is integral to how much money you’d get from your superannuation funds. Also, there are certain benefits that you can get from your super based on your assets. Such as tax returns when buying your first house.

However, you need to make sure your assets are valued correctly. Your assets need to be valued at the current market price and accurately. This is important that both you and all the other trustees provide the documents. This is an essential part of your SMSF audit checklist, and you need to comply with it.

Furthermore, hiding assets from taxation and audit authorities is a federal offense, and you’ll have to pay the penalty in case of violations. 

Make Sure the In-House Assets Aren’t Overbearing:

In-house assets include loans, credits, or investments based on your superannuation fund or other assets. If your in-house assets are too much, you will have to deal with a fair bit of trouble from the audit authorities.

For this reason, we recommend that your in-house assets aren’t more than 5% of your total assets. Make sure this is crossed off your SMSF audit checklist before making further plans. 

Check the Contributors Restrictions:

Your superannuation is a guarantee for your future. However, planning for your future should not restrict your present. For this reason, there’s a limit to how much money you can pay in addition to your super every year. 

Make sure the amount of money you’re paying as your super is within the contribution cap. Factors such as your age, income, and health are taken into account before determining your limit. So, make sure you’re complying with these before making a payment. 

Submit your tax return:

Suppose you’re eligible for a tax return. In that case, you have to submit the tax returns before the audit and present a copy to the auditors. Generally, people are eligible for tax returns if there’s any surplus or deductions to their payable taxes, or there are certain technicalities in your income.

If you or any of the other trustees in your self-managed super fund are eligible for a tax return, you have to send a copy of it to your auditor for transparency.

Conclusion:

Superannuation is a way to safeguard your future. Thus, if you’re aware of how superannuation works and other technicalities of taxation, going for self-managed super funds is the way to go. However, it’s also as technical as it gets, especially during audits. Any discrepancies during the audit can get you into trouble. For this reason, we’ve made an SMSF audit checklist, go through the article and make sure everything is in place for a seamless audit experience.

Did you know that you can take ownership of your own superannuation, and start a Self Managed Superannuation Fund (SMSF)? In a financial climate that shows uncertainty, it is enticing to take complete control over your financial future. In 2020 – the markets have been volatile. Pair this with the feeling of ambiguity the large super funds leave you. And you are left questioning if you should be taking charge of your own finances by opening your own self managed super fund. But before you start preparing all of your paperwork and take the plunge into managing your own super, you need to understand if a self-managed super fund is a right solution for you and your business.  An SMSF is not for everyone – but it definitely comes with advantages. However, there are also risks associated. If you are not compliant with superannuation rules. 

What is a self-managed super fund? 

A self-managed superannuation fund is a super fund that you manage yourself. These self-managed super funds are different from the industry and retail super funds that you see in the workplace. When you are in control of your own self managed super fund, you put the money that we would normally put into a retail or industry super fund into your own SMSF. You have total ownership of the investments and insurance. 

A self-managed super fund is a fund with less than five members, and each of those members is a trustee of the fund or a director of the trustee company. These other four members (including that you are the fifth member) can be friends, family, or colleagues. As all members of the fund are trustees, all are responsible for the fund. And it is important to note that a super fund is a form of trust. And a trust deed is required for the fund to function. The trust deed and superannuation legislation determine all activities of the fund. 

A self-managed super fund works like a retail super fund – where the superannuation benefits will be paid upon retirement. In addition, self-managed super funds receive the same concessional tax treatments whilst in the growth stage and payment phase. Due to the concessional tax treatment, there are strict rules and penalties to ensure that all funds adhere to receive retirement benefits. It is these rules and regulations that often deter individuals from starting their own self managed super fund. The additional work and risk outweigh the ownership of the self-managed super fund. Nevertheless, there are individuals that are taking ownership of their super. 

Benefits of Self Managed Super Funds

In a recent SMSF quarterly statistical report it is stated that nearly 43 percent of new self-managed super funds were opened by individuals. Between the ages of 25 and 44. They are gaining more and more popularity through the younger to middle-age workers. Because of the control members have to make their own investment decisions. Also, give the opportunity to invest in funds that are not included in the mainstream retail super funds. Some of the main benefits of managing your own self managed super fund include: 

Investment freedom

Members can manage their own funds and control their investments. They have the liberty to a greater pool of investment choices – and can jump on investment opportunities.
This also allows members to act quickly on investment decisions. You have the freedom to adjust an asset allocation very quickly if market conditions change. 

In addition, you can choose to invest in asset classes that you wouldn’t have the opportunity to invest in if you were with a retail super fund. As an example, you can buy physical gold or invest in art. These are all possible with a self-managed super fund. 

Ability to purchase a residential property

A very interesting benefit of self-managed super funds is the fact that you can buy an investment property through your self managed super fund. And go on to earn income from the rental payments. You will also enjoy the capital gains against the value of the property. The property purchase is your responsibility. And you have control over what you choose to buy. And who you rent it to (provided it is not a direct family member). This benefit is only for those who have a self-managed super fund – and not a standard retail fund. 

Fund tax position

Similarly to industry superannuation funds, your self managed super fund is taxed at a lower rate of only 15 percent. This is considerably lower than a marginal tax rate for work-related income which can be up to 45 percent. 

You can gain a tax benefit by contributing to your self managed super fund through concessional contributions. Your employer can pay the compulsory superannuation guarantee (9.5 percent p.a) into your self managed super fund. This will then be taxed at the concessional rate of 15 percent as opposed to your full tax rate (according to your salary). 

Family pool

When you start a self-managed super fund, you can have up to another four members join the fund. These members can be anyone you choose. As an idea, you can choose family members – pool together your collective super balance as a family. And invest more together and reduce the overall fees of a self-managed super fund (and retail industry super fund). 

Is an SMSF right for me? 

Even though self-managed super funds offer some enticing investment and tax benefits – they aren’t the right option for everyone. Before you consider opening up your own self-managed super fund, be sure to know what is involved, what admin work is required to make it work, and the costs that are involved. And most importantly you must know the risks that come with opening a self-managed super fund. Below are some points that outline if a self-managed super fund may be the right choice for you. 

1. Your super balance (or accumulated family super pool) is over AU$200,000. This is not mandatory, however, considering the costs involved in setting up a self-managed super fund, it’s a good amount to consider. 
2. You have an understanding of investments, the share market, asset classes, finances, and tax. You will need to have the knowledge to buy and manage an investment property and how to invest in international markets, even during volatile climates. 
3. Managing an SMSF is time-consuming. You need to ensure that you have the capacity to invest your time (not just invest your money) into your self managed super fund. If you are not capable of dedicating time, then your investments may suffer and you may not be able to stay ahead of your reporting required by the Australian Taxation Office.  
4. Need to have an understanding of legal requirements. Everyone required to adhere to legal obligations such as setting up a trust deed. You may not have legal experience, but an understanding will help.

Starting your own self managed super fund is a lot of work and comes with risk. If you are 100 percent committed and understand what is involved in opening up your own fund, then consider professional advice. Have a chat with us at RT Taxation about your self managed super fund. We can help you start your super fund and steer you in the right direction – allowing you to feel confident in your investment decisions.

The COVID-19 pandemic has affected everyone’s lives, and Self-Managed Super Fund (SMSF) trustees are no exception.

While the worst of the pandemic is (hopefully) behind us, trustees still have difficult questions to ponder as they focus. How best to position their Self-Managed Super Fund (SMSF) in the 2020-21 financial year.

Meeting new pension requirements

To help manage the economic impact of COVID-19, the Government has reduced the minimum drawdown requirements by half on common pensions, such as account-based pensions and market-linked pensions, for 2019-20 and 2020-21. This also occurred after the GFC in 2008, and you will need to consider and amend your pension strategies for 2020-2021 financial year. 

This includes ensuring that the minimum pension has been paid for this financial year. Where this requirement is not met, SMSFs will be subject to 15% tax on pension investments instead of being tax free.

It is important to amend your pension strategies for 2020-21 to reflect the “new” minimum pension standards. Where you have been receiving regular pension payments, it is likely you may want to withdraw more than the 50% of the required minimum payment for this year. Specialist SMSF advice should be sought to help you determine the most tax effective way to structure benefit payments, please get in contact with us to discuss this further.

Contribution Changes

For 2021 financial year, you should review your contribution strategies to ensure you can contribute in the most effective way and ensure you are below the contribution caps.

Non-concessional (after-tax) contributions are limited to $100,000 for the 2021 financial year and concessional (before-tax) contributions are limited to $25,000. There are strategies might be available to increase the concessional and/or non-concessional contributions depending on the personal circumstances.

SMSF trustees should be aware of the legislation that is slated to pass before the end of the financial year. If passed it will allow people aged between 65 and 66 to make voluntary contributions (previously restricted to people below 65) without meeting a work test. These older individuals will also be able to make up to three years of non-concessional superannuation contributions under the bring forward rule, so it will pay to get advice to maximise their contributions.

$1.6 Million Transfer Balance Cap and Total Superannuation Balance

The $1.6 million transfer balance cap applies to SMSF members who are receiving a pension. A $1.6 million transfer balance cap limits the amount of tax-free assets that can support a pension.  Ensure you are aware of the consequences of excess transfer balances and avoid exceeding the cap.

Different total superannuation balance thresholds exist for SMSF. Ensure you are across your fund’s total superannuation balance which may be relevant for contributions, exempt pension income or transfer balance account reporting.

How Can We Assist?

The team at R T Accounting & Taxation Services will provide you with all the assistance you need to get your SMSF up and running with minimal fuss. Our SMSF Administration Package includes:

• Tax Return
• Year-Round Support
• Fund Accounting and financial statements
• Online portal
• Coordination of annual audit via our in house Registered SMSF Auditor
• Fund minutes and resolutions
• Corporate secretarial services for your SMSF Trustee company where applicable