Keeping SMSFs on track – obligations and preparations (part III)

Photo of Peter Hogan, SMSF Association By Peter Hogan, SMSF Association

min read

Big changes ahead but don’t neglect current-year paperwork.

This is the third in a three-part series for ASX Investor Update on legislative changes to superannuation rules and what they mean for investors.

Amid all the preparation and learning needed for the superannuation changes coming into effect from 1 July, fund trustees cannot neglect their ongoing current obligations and preparations as the end of this financial year approaches.

Investment strategy

Trustees are required to review investment strategy regularly to ensure it continues to reflect the purpose and circumstances of the fund and its members. A self-managed superannuation fund (SMSF) investment strategy must consider the following:

  • The risks involving in making, holding and realising the SMSF’s investments, their expected return and the fund’s cash flow requirements.
  • The diversification and composition of investments.
  • Their liquidity, having regard to expected cash flow requirements.
  • The ability to pay the fund’s liabilities as they fall due.
  • Consider whether to hold insurance cover for each member of the SMSF.

The investment strategy needs to be reviewed at least once a year and be seen by the fund’s approved auditor. It is also important to review the strategy whenever the circumstances of any of the members change.

Annual returns

All SMSFs need to lodge an annual return with the Australian Taxation Office, to report the fund’s income tax, super regulatory information, member contributions and to pay the supervisory levy. The lodgement and payment date for most SMSFs is 15 May each year.

Where one or more prior year tax returns are outstanding the date is 31 October. All new registrants have a lodgement date of 28 February.

All financial statements and returns must be audited by an approved auditor and they cannot be lodged until they are. The auditor must also assess the SMSF’s compliance with the superannuation laws. Remember to appoint the auditor in time to allow for lodgement of the annual return. Lateness may result in penalties.

Valuation of assets

When preparing the financial statements of the fund, trustees are required to value each asset at market value, which is generally defined as being “the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller”.

For funds that hold listed shares and managed investments, the valuation of these is uncomplicated. Assets such as residential and commercial property, unlisted entities and collectables, need a more thorough approach. The fund must be able to demonstrate that the valuation has been arrived at using a fair and reasonable process.

It is recommended that independent valuations be obtained for properties. A valuation can also be undertaken by a fund trustee as long as it is based on objective and supportable data.

Timely valuation of assets is now more important than ever because the incoming legislation requires members to know their total super balance at 30 June to determine their eligibility for certain items such as non-concessional contributions and concessional catch-up concessions. Pension transfers also need to be valued so trustees can ensure members do not breach the $1.6-million transfer cap.

Estate planning and death benefit nominations

The new superannuation rules mean it is essential to review your estate planning strategy, especially where larger amounts may be forced out of the superannuation system because of the $1.6-million transfer balance cap.

Consideration should be given to the trusteeship of your SMSF, be that corporate or individual. However, the SMSF Association believes a corporate trustee is always best practice because it can be administratively easier in estate planning.

Enduring powers of attorney may also be crucial for members of SMSFs. They allow trustees to appoint someone to make decisions on their behalf upon losing mental capacity. Failure to have an enduring power of attorney can result in delays and the potential for the fund to be non-complying.

Binding nominations also need to be considered as part of estate planning. They specify how superannuation benefits will be paid on your death.

These considerations are specialist areas of law and need to be checked with your SMSF trust deed. It is important to seek help from a specialist estate planning lawyer.

SIS compliance


With 30 June fast approaching it is imperative to ensure you have withdrawn your minimum pension amount for the financial year or not exceeded your maximum if you have a transition-to-retirement income stream. If the minimum pension standards are not met, the pension is to cease and the assets supporting it are deemed to not be in retirement phase for the whole of the financial year. You must also ensure that all pension documentation is on file and appropriately signed.

Record keeping

The ATO has identified poor and inadequate record keeping as a problem for SMSFs. The following records need to be kept for a minimum of five years:

  • Accurate and accessible accounting records that explain the transactions and financial position of the SMSF. This includes records kept for accessing Capital Gains Tax (CGT) relief.
  • An annual operating statement and an annual statement of the SMSF’s financial position.
  • Copies of all SMSF annual returns and documents lodged with the ATO.

Contribution limits and reserving strategies

Part one of this three-part series detailed all the contribution changes that will affect your SMSF from 1 July 2017. Remember that the new lower concessional cap rules mean you should check that all concessional contributions, especially salary sacrifice arrangements, you receive in the 2017-18 financial year do not exceed $25,000. This also includes any reserving strategy you may intend to use in June 2017.

Non-concessional limits also change from 1 July, so make sure you understand your total superannuation balance at 30 June and make the appropriate contributions.

Planning for the $1.6-million cap and CGT relief

Be aware of the new $1.6 million transfer balance cap, CGT relief, and the documentation that needs to be available by 30 June. Minutes should be created detailing that members intend to transfer values out of retirement phase so as not to breach the new transfer balance cap. Minutes need to document which method of CGT relief is intended to be undertaken.

Staying on top of compliance and documentation will help you easily navigate the new superannuation reforms and compliance obligations with the ATO.

About the author

Peter Hogan is Head of Technical at SMSF Association.

For more information to help you stay up to date, visit the Trustee Knowledge Centre. Download your own SMSF Yearly Planner and access a library of practical resources, information, education and ongoing updates. Membership of the centre is $99 and is deductible from your SMSF.

From ASX

SMSF Calculators provide a range of tools that help you determine how much retirement savings you will need and how different investment classes have performed over time.

The views, opinions or recommendations of the author in this article are solely those of the author and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691 and its related bodies corporate ("ASX"). ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, ASX excludes all liability for any loss or damage arising in any way including by way of negligence.

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