Update on issues affecting SMSFs
At a compliance level, the ATO says that it is focusing on:
- engaging with new trustees to ensure they can operate their SMSF and are not seeking illegal early access to their retirement benefits;
- ensuring that trustees understand their obligations and that, although their tax agent or accountant will assist trustees to meet their obligations, they themselves are the ones who are accountable;
- ensuring annual returns are lodged, and lodged on time (all SMSFs with two or more years of overdue lodgments will have their regulation details removed from Super Fund Lookup, potentially affecting rollovers from APRA funds, and employer contributions);
- for new funds, whether they are entitled to receive their notice of compliance;
- reviewing irregularities in exempt current pension income and non arm’s-length transactions;
- re-reporting of contributions and compliance with excess contributions tax release authorities;
- arrangements involving holiday travel claimed as investment expenses by SMSF trustees; and
- every fund reported to it by approved SMSF auditors. The ATO wants to make those trustees more fully aware of their obligations and ensure the contraventions are dealt with appropriately.
Related party transactions
The breaches most commonly reported to the ATO by SMSF auditors are trustees investing in, or transacting with, related parties in breach of the rules. This can include providing a loan or other financial assistance to a member or relative, which is prohibited.
Further, it is also common when there is a ‘loan’ to a member that it doesn’t meet the characteristics of a genuine loan anyway, and the member is simply accessing their super before they are entitled to.
ASIC warning to real estate industry
ASIC has warned the real estate industry that agents recommending investors use a SMSF to invest in property must ensure they are appropriately licensed to provide such advice.
Real estate agents may not realise they are providing ‘financial product advice’ and need an Australian financial services (AFS) licence when making recommendations or statements of opinion to a person to use an SMSF to invest in property.
Editor: Although this affects the real estate agents personally, it’s obviously important for SMSF trustees in this situation to ensure they are receiving appropriate advice from a person qualified to do so.