Summary of the Government’s Response to Cooper Review Recommendations on Self  Managed Super Funds

a.    ATO
ATO will be provided with new regulatory powers to “prevent” and penalize breaches of the super legislation. Administrative penalties on a sliding scale basis will be levied upon less serious cases of non-compliance and will be payable by trustees from their own personal resource (and not from the assets of the SMSF).
The ATO will also be tasks to issue trustees with a “direction” to rectify contraventions within a specified timeframe and enforcement of mandatory education for trustees where there is non-compliance with the super legislation.  This is especially for less serious non-compliance, so that theses trustees are aware of their obligations.
b.    SMSF Service Providers
SMSF service providers will need to comply with knowledge and competency requirements.  ASIC will develop a mandatory SMSF specialist knowledge component of Regulatory Guide 146 to impose minimum training requirements on financial advisors providing services to SMSFs.
ASIC has also been appointed as the registration body for Self Managed Superannuation Fund approved auditors.  ASIC will determine the qualifications and minimum ongoing competency and knowledge standards required for eligibility to be registered, taking into account existing professional competencies and knowledge standards.  The ATO will monitor compliance with the approved auditor standards.

SMSF approved auditors will also be required to meet independence standards as part of their ongoing registration. ASIC will examine existing auditor independence standards that may be applied and if necessary, develop new independence standards.

c.    Other issues
•    The government will undertake a review of borrowings in two years time;
•    The government will continue to allow SMSFs to invest in collectibles and personal use assets, provided they are held in accordance with tightened legislative standards;
•    The ATO will not be provided with the power to issue binding rulings in relation to SMSFs;
•    Investment in in-house assets will not be prohibited;
•     SMSF trustees will not be required to provide information to members on an annual basis;
•    Increase in annual SMSF levy with effect from 2010-2011 financial year;

PLAN WELL AHEAD FOR CRITICAL SUPER FUND TRANSACTIONS

As a follow on from my previous article on Trustee’s responsibilities, I will now talk about one of our basic challenge - “too little time to get the important matters attended to”, which we are familiar with on a day to day basis, are also applicable to Self Managed Superannuation Fund management. 

I recently came across cases where Trustees of DIY SMSF initiated contribution activities right up at the last minute (ie, June 30).  In one case, the contribution was $50,000 and it was from a gain on sale of a property.  After meeting with the accountant who had provided the appropriate advise, the bank and settlement agent did not contribute the $50,000 proceed into the appropriate SMSF bank account of the Trustee. It was instead contributed into the personal account of the Trustee. By the time the Trustee found out, it was already July 4, 2010. There was nothing much the Trustee could have done.  As a consequent, the Trustee had failed to make the appropriate contribution at the requisite time at no fault of his/ her part. From an SMSF auditor perspective, if the Trustee had deemed the amount as contribution into the DIY Super Fund before 30 June, then the auditor may have to qualify the audit report accordingly because of the contravention. However, if the Trustee did not treat the amount as contribution, then it will result in higher personal income tax position for that year for the Trustee.

The lesson learnt from the above, is that we need to give ourselves more time to initiate and execute such critical transactions failing which will have financial implications. So, if something is really important, then do give yourself ample time before you execute such transactions.  Also, do make sure lines of communications with all professional parties involved, in this case the banker and also settlement agent are crystal clear (and also in black and white), so that if something does go wrong, you will know where it happened.

This article is not a financial advice, and author is Not a financial advisor or tax agent.  Please solicit appropriate advise from professionals before making any financial decisions.

TRUSTEE TO ASK TOUGH QUESTIONS

Following on from my previous article about Trustees’ responsibilities and planning for the unexpected future, there is a long list of questions one would asks to prepare for Self Managed Superannuation Fund’s unexpected future.

They include the following list of questions –

-          has the Nomination for Death Benefit signed and completed ?

-          has the beneficiaries for the insurance policies assigned ?

-          are the assets owned legally by the Self Managed Superannuation Fund ?

-          are there related party borrowings ? should this be cleared off ?

-          is there a “will” in place ?

-          are you getting proper financial and tax advices from a registered professional ?

-          does anyone know where all accounting and minuted records of the affairs of the SMSF are maintained ?

-          have prior audit reports and or management letters identified any issues with the fund ? if yes, appropriate steps need to be taken immediately to address each an everyone of the issues identified, as leaving the issues unattended may have undesirable consequences in the future.

So, to all Trustees, start asking the tough questions and be responsible for your SMSF.  Only then will you realise what you don’t know….

This article is not a financial advice, and author is Not a financial advisor or tax agent.  Please solicit appropriate advise from professionals before making any financial decisions.

DEATH OF A SMSF MEMBER

After performing many SMSF audits over the years, I have come to realize some recent trends that Accountants, Trustees and SMSF Auditors need to be aware.

In this article I will talk about “death”.  It is inevitable and all of us will face death sooner or later whether we like it or not.  You might be asking “what does death got to do with SMSF”.  Well, quite a lot in fact.  Recently I have come across more and more SMSF experienced death to its Trustee or member. For the remaining Trustee, who are NOT aware and NOT on top of their DIY Super Funds, it will be a nightmare to figure out what has happened and what needs to be done to ensure their Self Managed Super Funds are still in compliance. 

As a SMSF Audit Specialist, seeing such events unfolding and trying to assist the other remaining Trustee figure out what has happened was disheartening.  From my perspective, I would definitely NOT want my wife and family to go through this.  Conventional wisdom, suggest that all Trustees need to take their responsibilities seriously.  Trustees need to know what is happening to their SMSF, and at the same time plan for the unexpected future. To that end the ATO has provided a guide to assist Trustees in discharging their obligations. So to all Trustees, you need to get on top of your Self Managed Superannuation Fund.  After all the ATO has provided you with a tax incentive vehicle (through the use of Self Managed Superannuation Fund) to lower your overall personal tax bill. It would be appropriate that all Trustees start asking questions and being responsible for their Self Managed Superannuation Fund.

This article is not a financial advice, and author is Not a financial advisor or tax agent.  Please solicit appropriate advise from professionals before making any financial decisions.