Self Managed Super Fund

Setting up a Self Managed Super Fund

Understanding your role and responsibilities

Complying with the super and tax laws is your responsibility, even if you use a super or tax professional, or a financial adviser. So it's important you understand what you need to do.

As a trustee, your duties and responsibilities include:

• Making sure the fund's sole purpose is to pay retirement benefits to members
• Accepting contributions and paying benefits (pension and lump sum) according to the super and tax laws
• Making investment decisions and complying with any restrictions
• Ensuring an approved auditor is appointed for each income year
• Completing administrative tasks, such as lodging annual returns and record keeping
• Reviewing and updating the fund's trust deed and investment strategy.

You need to tell the Australian Taxation Office within 28 days if there is a change in any of the following:

• Trustees
• Directors of the corporate trustee
• Members
• Contact details (contact person, phone and fax numbers)
• Address (postal, registered, or address for service of fund notices).

To avoid penalties, make sure you understand and comply with your duties and responsibilities under the super and tax laws. If you don't comply, the Australian Taxation Office can:

• Impose administrative penalties
• Make an agreement with you to rectify the problem
• Make your fund non-complying (which means your fund loses its tax concessions)
• Disqualify you as trustee
• Prosecute in the most serious of cases.

Investing your fund's money

Being a trustee of an SMSF gives you more flexibility when it comes to investing your fund's money. Unlike some other super funds, you can choose the investments for your fund, so long as you invest according to the following:

• The fund's trust deed
• The investment strategy
• The super laws

While the super laws don't tell you what you can and can't invest in, they do set out certain investment restrictions you need to comply with.
For example, unless an exception applies, trustees generally can't:

• Lend the fund's money or provide financial assistance to members and their relatives
• Acquire assets from related parties of the fund including
  
  • Fund members and their associates
  • All the fund's standard employer-sponsors and their associates
• Borrow money on the fund's behalf (certain instalment warrant arrangements are allowed)
• Lend to, invest in, or lease to a related party of the fund (including related trusts), more than 5% of the fund's total assets
• Enter into investments on the fund's behalf that are not made or maintained on an arm's length (commercial) basis.

The investment restrictions are some of the most important rules you need to comply with under the super laws. If you don't, the Australian Taxation Office may impose significant penalties. It is recommended that you speak to an SMSF Professional to make sure your investments comply with the law.

Appointing an approved auditor

You need to appoint an approved auditor to audit the fund each year. An approved auditor will:

• Examine your fund's financial statements
• Assess your overall compliance with the super laws

An approved auditor needs to be a registered company auditor or a member of  certain professional organisations. They need to follow professional auditing standards that require the audit to be conducted independently. An SMSF professional may help you find an approved auditor.
Before the annual audit, you or your SMSF professional needs to prepare information about your accounts and transactions for the previous income year. This information is then sent to the approved auditor.
The auditor will provide you with a letter of engagement confirming they accept the appointment and the scope of the audit.
You need to give the auditor any further documentation they request so they can audit your fund.
Once the approved auditor has completed your fund's audit, they will provide you with the following:

• An audit report
• A management letter, which summarises the findings of the audit and any action taken or proposed by the trustees.

You need to have an auditor's report before you lodge your fund's SMSF annual return. The law requires that you appoint your auditor at least 30 days before the annual return is due to be lodged. To ensure you lodge on time, you need to allow enough time for your auditor to conduct the audit.

The auditor will also notify the Australian Taxation Office if they:

• Find you've breached certain super laws
• Have concerns about your fund's financial position.

Mr Peter J Rogerson, of Rogerson Kenny Business Accountants is an approved auditor of Self Managed Superannuation Funds. Click here to contact Peter.

Your annual responsibilities

As a trustee there are some things you need to do each year under the super and tax laws. There are also some things you need to do to make sure your fund complies with the law and operates effectively.

Use the following checklist each year to make sure you meet your annual responsibilities.

Check your Progress

The trustees of the fund need to:

• Ensure the fund's record-keeping is up to date in preparation for the annual audit and lodgment of annual returns
• Organise for your fund's annual financial statements to be prepared (statement of financial position and operating statement)
• Make sure an approved auditor is appointed to audit the fund
• Lodge the fund's annual return and report contributions made on behalf of the fund's members to the Tax Office by the due date
• Pay the supervisory levy and the fund's income tax liability when due
• Lodge a business activity statement with the Tax Office by the due date (if your fund is registered for GST)
• Review your fund's trust deed and investment strategy and update them as required.

Keep in mind that you need to lodge an annual return for the income year in which you set up your fund. As part of this return, you also need to report contribution information to the Australian Taxation Office for all members every year, including those members with nil contributions.

Rogerson Kenny Business Accountants Melbourne can assist you with your accounting and auditing requirements. If you would like to appoint Rogerson Kenny Business Accountants as your approved auditor, or would like to discuss this topic further, click contact us or call us on (03) 9802 2533.

< Back to Setting up a Self Managed Super Fund