Resources For SMSF Trustees

Common SMSF errors to avoid

If an SMSF fails to comply with legislation, an auditor can record a contravention and report this to the ATO. A fund that has contrived the law can be deemed ‘non-complying’. A non-complying fund will lose its complying status, and its tax concessions. In addition, trustees can be penalised.

Following are some of the most common errors the ATO encounters when auditing funds. We recommend you read this regularly to make sure you do not risk your funds tax concessions or ATO penalties.

• Overdrawing the bank account
  Overdrawing the funds bank account is a form of borrowing, which is not allowed.
• Accessing benefits early
  Benefits cannot be taken fom the fund until preservation age, and a condition of release are met.
• Borrowing money from the fund
  It is important to keep your personal funds and the SMSF’s funds separate so that you do not inadvertently draw money from the SMSF.
• Exceeding contribution limits
  Where contributions are made in excess of the limits.
• Contributions
  If a contribution is made in late June and does not show on the SMSF bank statement until July it will not be recorded as a contribution for the year ending June, but rather the following year.
• Pension payments
  Where the minimum pension is not taken or more than the maximum (for a TRIS) is taken.
• Name on investments
  It is important to ensure that all investments by the fund are in the correct name format, which is very specific.
• Use of Fund asset
  Assets cannot be used by the members or their associates. This includes making loans to them. This applies even if the terms are commercial.

SMSF investment strategies in Australia
The ATO is increasingly focusing on SMSF investment strategies, and have detailed their expectations for trustees’ investment strategy processes and documentation.

As a trustee, one of your responsibilities is to manage the fund’s investments while ensuring that investment holdings align with the fund’s investment strategy. SMSF trustees are also required by law to document the investment strategy for the making and holding of investments.

At a minimum, the investment strategy must consider risk, return, liquidity, diversification, ability to discharge liabilities and insurance.

What’s involved in reviewing your investment strategy?
To ensure you meet your responsibilities and your fund remains compliant, we recommend you – in your capacity as a trustee – review your current investment strategy.  You need to confirm:

• your strategy has been well thought out and is relevant for your circumstances; and
• the documentation meets the requirements and enables your auditor to clearly see how the requirements have been met.

Your investment strategy should be reviewed annually, or more often if your circumstances change.

How can Bentleys help?
Preparing or reviewing an investment strategy is an important task for a trustee, and as such, we strongly recommend you seek professional advice from a licenced financial adviser. If you do not have a licensed financial adviser, we can refer you to one.

We acknowledge some trustees are quite comfortable undertaking tasks such as these themselves, and this is certainly an option.

Whether you use a financial adviser or complete the review yourself, Bentleys has tailored services that will meet your needs.

Below are our services tailored to the needs of SMSF trustees.

Your Money, Your Control. Click here for your guide to understanding SMSFs 

Want to know more about how Bentleys can help you?

Make a time for a chat with us today. We’re here to help you get where you want to be.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.