Time To Do The Annual SMSF Stocktake

The changes to self-managed superannuation funds that come into effect on July 1 have been well flagged and it is understandable if people managing their own nest eggs have been focusing almost exclusively on those changes for some time now.

So it’s timely that Your Money and the SMSF Association reminds you about all the other obligations that you have as a trustee of an SMSF — which have probably fallen off the radar in the scramble to prepare for the end of the financial year.

Investment Review

You are required to run the ruler over your investment strategy at least once a year, with the work approved by your approved auditor, to ensure it is fit for purpose.

This means, according to the SMSF Association, that trustees must turn their attention to matters such as:

  • The risks involved in making, holding and realising the SMSFs investments, their expected return and cash flow requirements of your SMSF. t The diversification and composition of your portfolio.

  • The liquidity of your investments, having regard to expected cash flow requirements.

  • The fund’s ability to pay liabilities in a timely manner.

  • Considering whether to hold insurance cover for each member of your SMSF.

Annual Returns

All SMSFs need to lodge an annual return detailing income tax, super regulatory information, member contributions and payment of the supervisory levy, with the tax office.

This must be done by May 15 each year, unless one or more prior year tax returns are outstanding, in which case the lodgement date is October 15.

All new registrants have a lodgement date of February 28.

The tax office, however, has extended the due date for the lodgement of the 2015-16 financial return from last Monday to June 30.

Your annual return cannot be lodged until the fund has been audited, which will involve your auditor examining your financial statements and ensuring you have complied with the relevant laws.

The SMSF Association recommends you get in early with appointing your auditor to allow time for the lodgement of the return.

Valuation Of Assets

You need to work out the market value — the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller — of each asset held by your fund.

This is easy when it comes to listed shares and managed investments but assets such as property, unlisted entities and collectables need some more thought.

To ensure the valuation is fair and reasonable most people use an independent valuer but you can do it yourself as long as the calculation is based on objective and supportable data.

Changes to how much you can hold in your pension fund which come into effect on July 1 means the valuation process is more important than ever.

Estate Planning and Death Benefit Nominations

Nobody likes confronting their own mortality but the law requires us to. Every trustee must review their estate planning strategy, and it is particularly important for wealthier funds.

The SMSF Association says consideration should be given to the trusteeship of your SMSFs, with a corporate trustee preferred to make estate planning administratively easier.

An enduring power of attorney may be important also, particularly for trustees who are getting on.

Forgetting your grandkids names is one thing but forgetting the names of your fellow trustees is another altogether.

An EPA means there will be someone there to make a decision on your behalf if you lose your mental capacity.

Binding nominations are a good way of ensuring your superannuation benefits are paid out in an orderly way when you eventually go to God.

It’s complicated, so make sure you think about getting a specialist estate planning lawyer.

SIS Compliance

Pensions: You have to have withdrawn your minimum pension amount for the financial year by June 30. If you are on a transitionto-retirement income stream make sure you do not exceeded your maximum amount.

If you fail on these points you run the risk of the assets supporting the pension being deemed to not be in retirement phase for the whole of the financial year.

Record keeping: The SMSF Association says you need to make sure you keep the following information for at least five years:

  • Accounting records that explain the transactions and financial position of your SMSF.

  • Records for accessing capital gains tax relief.

  • Annual operating statement and annual statement of your SMSF’s financial position.

  • Copies of all SMSF annual returns and documents lodged with the tax office.

Contribution Limits And Reserving Strategies

Lower concessional cap rules coming into effect next financial year mean you need to be ensure concessional contributions, primarily those that are salary sacrificed, in 2017-18 come in under $25,000.

Non-concessional limits also change from July 1 so make sure you know exactly what’s coming into your find.

Planning For The $1.6 Million Cap And CGT Relief

The SMSF Association is imploring trustees to be aware of the new $1.6 million transfer balance cap, CGT relief, and the documentation that needs to be formulated for June 30.

It is important to keep records of how you arrived at your decisions so ensure minutes are created to prove that you intend to do whatever it takes to stay under the the new transfer balance cap.

You also need to document which method of CGT relief you are going to use.

If you have made it to the end of this article you will probably appreciate just how onerous the obligations of an SMSF trustee can be.

So do ask a seasoned professional to make sure you are on track.

Ben Harvey

Your Money - The West Australian

May 22 2017

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