When you become an SMSF trustee, you take on the administrative responsibilities designed to make sure your fund complies with the law. These responsibilities include arranging an annual return and audit, valuing the fund’s assets, record keeping and withholding tax.
Lodging your annual return
All SMSFs must lodge an annual return with the Australian Tax Office. If you’re not using a tax agent, your lodgement date will be October 31 for existing funds and February 28 for funds that commenced in the preceding financial year. If you use a tax agent, you should contact the agent to find out your submission date. Annual returns prepared by a tax agent are generally due by 15 May.
The annual return comprises:
- The annual financial and compliance audit.
- Member contributions information.
To complete the fund’s tax return, you, your accountant or tax agent will need all your investment records, contribution receipts, contract notes, dividend notices, receipts and other documents to calculate the fund’s taxable income.
You will need to appoint an approved auditor for the annual financial and compliance audit. You should appoint an auditor early, preferably before the end of the financial year, because you can’t lodge your tax return until the auditor has given your fund’s financial statements the all clear. Your auditor must be an approved SMSF Auditor registered with ASIC.
The audit involves a financial audit and a compliance audit. With the former, the auditor will check that the SMSF’s financial statements and accounts represent an accurate description of the fund’s financial position. To do this, your auditor may ask to see valuation reports, bank statements, title deeds and dividend receipts. With the compliance audit, your auditor will verify that the SMSF has complied with the SIS Act at all times during the year.
The ATO nominates different sections of the act that auditors must specifically address each year. If your auditor detects a breach, they are required to report that breach to you in writing so that it can be rectified. Importantly, if the breach is material, your auditor is required by law to report it directly to the ATO.
Your auditor will provide you and any other trustees with a written audit report.
The annual return also includes reports on member contributions. You’re required to report on the total amount of and types of contributions for each member, including any contributions rolled into the SMSF during the year. The ATO uses this information to see if any members are entitled to a government super co-contribution, have exceeded their contributions caps, and to check employer compliance with the super guarantee.
Finally, your annual return includes the ATO’s Supervisory Levy, which for the 2013/14 Annual Return is $388 and for the 2014/15 Annual Return and subsequent returns, $259. For more information about completing your annual return, the ATO’s NAT 71606  Self Managed Superannuation Fund Annual Return Instructions’ is available at on the ATO’s website.
Valuing your SMSF’s assets at market value
Your SMSF’s assets must be valued at market value on an annual basis on the fund’s reporting date, which will generally be June 30. This ensures that the members’ benefits as reported in their annual statements reflect all market value movements over the period. It also allows you to monitor and review investment performance and asset allocation, confirm that the fund is not in breach of the ‘in-house assets ’ rule, and make sure the fund has sufficient resources for the payment of any benefits.
Determining the market value is straightforward for many assets like listed securities (shares and fixed income securities), managed funds, and term deposits and cash. These assets are valued at their last traded price on the last business day of the financial year. If the asset is a managed fund, the net asset value is supplied by the manager. For business real property or exotic assets such as collectables, establishing the market value can be more difficult and a qualified valuer may be required.
The ATO has published a guide entitled ‘Valuation guidelines for self-managed superannuation funds’, which outlines their position. The ATO does not intend that obtaining a market valuation should be onerous or expensive, however a qualified external valuer may be required where the value of the asset represents a significant proportion of the fund’s value or the nature of the asset indicates that the valuation is likely to be complex.
When valuing property assets, the ATO suggests that relevant considerations may include the value of similar properties, the amount paid for the property in an arm’s length market, independent appraisals and for commercial properties, net income yields. If the fund owns an investment property, valuations could be obtained from local real estate agents, whereas if it’s a commercial property, you may require the services of a qualified property valuer.
Keeping accurate records
The ATO requires that trustees keep accurate records for prescribed periods. The following records must be kept for a minimum of five years:
- Accounting records that detail the transactions and financial position of the SMSF
- Annual returns
- Copies of any other returns or statements provided to the ATO or other super funds (eg. Rollover Benefits Statement)
These records must be kept for a minimum of 10 years:
- Minutes of trustee meetings
- Trustee declarations
- Members’ written consent to act as trustees
- Copies of all statement or reports given to members
You are also required to notify the ATO within 28 days if there is any change in the SMSF’s details, including:
- Contact details (contact person and phone number)
- Change in the trustees, members, or directors of the corporate trustee
You can notify the ATO by using the online service at www.abr.gov.au  if you have a primary digital certificate, or by downloading and lodging NAT 3036 form  ‘Change of details for superannuation entities’.
If you pay a pension or lump sum benefit to a member under 60 years old, then you’ll need to withhold tax. If the member is over 60 years old and the benefit is paid from an untaxed source, you’ll also need to withhold tax. Lump sum death benefits that are paid to non-dependents are also subject to withholding tax.
If the above scenarios apply, the first step is for the fund to register for pay as you go withholding tax (PAYG). This needs to be done as soon as you know that you will be making a payment that requires you to withhold tax. If your fund has an Australian Business Number (ABN), you can register for PAYG at www.abr.gov.au . Make sure to include the member’s Tax File Number (TFN), otherwise you may have to withhold tax at a higher rate.
As trustees, you will need to issue payment summaries to the members who had withholding tax deducted from their benefits. In the case of pension payments, the payment summary needs to be issued by July 14 following the end of the financial year in which payment is made. For a superannuation lump sum, the payment summary is required to be issued within 14 days of making the lump sum payment. Finally, a ‘PAYG withholding payment summary statement’ (NAT 3447 ) should be forwarded to the ATO by August 14.