SELF MANAGED SUPERANNUATION FUNDS – MAIM AND BLAME ATTITUDE OF THE ATO
There has been a lot of coverage recently in various media outlets about some organisations who are actively promoting the establishment of self managed superannuation funds (SMSF) for individuals and small business owners on the basis that they are cheap and simple to run.
Chartered Accountant, Joe Kaleb of Australianbiz, advises that anyone considering establishing their own SMSF should proceed with caution and obtain advice from their financial adviser beforehand. This is because superannuation laws are constantly changing and just far too complex for most individuals to understand. What is not being adequately communicated by these promoters is that trustees of a SMSF (i.e. mum and dad funds) have onerous responsibilities placed upon them including:
- Complying with complex and changing superannuation rules and regulations imposed by the ATO.
- Understanding the trust deed, keeping it up-to-date and not undertaking any acts that contravene the deed.
- Having an appropriate investment strategy and sticking to it. Their accountant is not even allowed to prepare this strategy for the trustees unless they have a financial services licence.
- Ensuring that all superannuation fund investments are made in the name of the fund.
- Preparing minutes for all transactions entered into by the fund during the income year.
- Ensuring that the fund is audited within 9 months of the end of the income year.
Failure to comply with any of these and the many other responsibilities imposed upon trustees could render the SMSF non complying which means that the market value of the fund's assets (excluding undeducted contributions) is taxed at the top marginal rate of 47% and also the net income is taxed at 47% in each income year that the fund is non complying.
The ATO have also imposed more onerous responsibilities on auditors of SMSF's that apply from 1 July 2004 (regardless of the income year involved) by firstly requiring that they be sufficiently “independent” (although the ATO has no clear guidelines on this issue) and then requiring that the auditor report certain contraventions to both the trustees and the ATO regardless of how minor they are including:
- Where the fund's bank account goes into debit by only $1.00 for one day.
- Where a superannuation fund's dividend cheque is inadvertently banked into the employer's or trustees' bank account even though it may be immediately deposited bank into the fund's account.
In effect superannuation fund auditors are now required to act as whistle blowers for the ATO as they don't seem to have the resources to cope with the complexities of the system and to monitor the number of SMSF's that are currently in existence (over 300,000) and being established at the rate of 2,500 per month. The end result of all of this is that trustees will be paying a lot more to have the accounts of the fund reviewed by an independent auditor and to their accountant for preparing the accounts, tax return and other documentation.
About Australianbiz
Australianbiz is the definitive source of on-line information for small businesses in Australia. The site was developed and is maintained by practicing accountants with the aim of providing business owners with an additional source of relevant and practical information that can assist them to better manage their business and also their tax compliance obligations. Included are finance tools, templates, business articles, monthly tax updates and much more.
For further media information or to arrange comment please contact:
JOE KALEB
B.Bus, Master of Taxation, CA, FTIA
Practicing Chartered Accountant
Founder & CEO
AUSTRALIANBIZ PTY LTD
Email:enquiry@australianbiz.com.au
Web: www.australianbiz.com.au
