BJ Love & Co - SMSF checklist long

BJ Love & Co.

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Self managed superannuation funds—checklist (long version)

Purpose

This long form checklist is designed to help you, as a trustee of a self managed superannuation fund (SMSF), with the operation of your fund. Using the checklist should help your fund to comply with the legislative requirements for SMSFs. Regulated superannuation funds that comply with these legislative requirements will pay income tax at the concessional rate of 15%. A short form checklist (NAT 6854) is also available.

Fact sheets

The checklist highlights some of the more important rules under the Superannuation Industry (Supervision) Act 1993 (SISA) that you, as a trustee, must comply with. It also highlights some other key issues you should be aware of in managing your own SMSF.

If, when using the checklist you identify a problem with your fund or need further information, the following may assist you:

seek advice from your professional adviser, for example, financial planner, accountant, tax agent, etc.
visit the ATO superannuation website at www.ato.gov.au/super
obtain A Fax from Tax on 13 28 60
contact the Superannuation Infoline on 13 10 20 for the cost of a local call

Fact sheets available to date are:
Self managed superannuation funds—introduction to superannuation	NAT 2057
What is a self managed superannuation fund?	NAT 2058
Setting up a self managed superannuation fund	NAT 2059
Self managed superannuation funds—duties of trustees	NAT 2060
Self managed superannuation funds—sole purpose test	NAT 2061
Self managed superannuation funds—acceptance of contributions	NAT 2062
Self managed superannuation funds—investment strategy and investment restrictions	NAT 2063
Self managed superannuation funds—administrative obligations	NAT 2064
Self managed superannuation funds—our compliance approach	NAT 2065
Election and Return Lodgment—APRA or the Tax Office? (Self managed superannuation funds)	NAT 2067
Self managed superannuation funds—preservation rules	NAT 2070
Self managed superannuation funds—payment of benefits	NAT 2071
Self managed superannuation funds—payment of allocated pensions	NAT 6731
Self managed superannuation funds—allocated pension payments	NAT 6733

Checklist

Purpose of fund

My fund is managed and maintained by the trustees in accordance with the sole purpose test, for example, the sole purpose of the fund is to provide retirement benefits for members.	[ ]
All the trustees of my fund are aware that they are responsible for the fund’s compliance. This is so, even when external advice is sought, for example, from a tax agent, financial planner, investment adviser etc.	[ ]

Contravention of the sole purpose test is a very serious matter. It can result in up to 5 years imprisonment or a fine of up to $220,000 for trustees. In addition, the fund may lose the advantage of concessional tax rates in which case the assets of the fund (less the value of any undeducted contributions) will be taxed at 47%.

If you think you may have contravened the sole purpose test you are urged to speak to your accountant/adviser or the Tax Office for help.

Trust deed

My fund’s trust deed:

is properly executed	[ ]
states the name of the fund	[ ]
includes a statement that the fund must appoint a corporate trustee	[ ]
OR
that the sole or primary purpose of the fund is to provide old-age pensions.	[ ]

It also sets out:

who the trustees are	[ ]
how trustees are appointed and how they can be removed from the fund	[ ]
the powers of the trustees	[ ]

Deeds may also cover:

that the members agree to act as trustees	[ ]
confirmation that the trustees are not ‘disqualified persons’	[ ]
that trustees cannot accept payment for services as trustees	[ ]
paying benefits to members	[ ]
what contributions the fund can accept	[ ]
who can be members	[ ]
winding up the fund	[ ]

Overall:

I have read and understand my trust deed	[ ]
I know the deed sets out the rules that all the trustees of the fund must comply with.	[ ]

Note: As a trustee, you are bound by your deed and responsible for any contravention of the rules set out in the deed. For these reasons it is very important that you know the contents of the deed.

Trustees and members

My fund is an SMSF because:

there are fewer than five members in the fund	[ ]
all members of the fund are trustees of the fund (or directors of the trustee company)	[ ]
each individual trustee of the fund, or director of the trustee company, is a member of the fund	[ ]
no member of the fund is an employee of another member of the fund, unless those members are related	[ ]
no trustee of the fund receives any remuneration for his or her services as a trustee	[ ]

OR for single member funds:

the member is the sole director of the trustee company; or	[ ]
the member is related to the other director of the trustee company (and there are only 2 directors of that company); or	[ ]
the member is not an employee of the other director of the trustee company (and there are only 2 directors of that company); or	[ ]
the member is one of only two trustees, of whom one is the member and the other is a relavtive of the member, or	[ ]
the member is one of only two trustees and the member is not an employee of the other trustee; and	[ ]
no trustee of the fund receives any remuneration for his or her services as a trustee	[ ]

There are some exceptions to these general rules, for example, where a member is under a legal disability.

Electing to be regulated

An election that the SISA is to apply to the fund was lodged with the Tax Office within sixty days of establishing the fund.

[ ]

A fund must elect to be a regulated superannuation fund and comply with the requirements of the SISA to ensure it is a complying superannuation fund. If it does not, the fund may not receive concessional taxation treatment and/or other sanctions may be imposed on the trustees of the fund for contravening the SISA where the fund is a regulated superannuation fund.

Tax file number

The fund has its own tax file number.

[ ]

Australian Business Number

The fund has its own Australian Business Number (ABN)

[ ]

Although it is not compulsory that your fund has its own ABN, it may be beneficial to the fund to obtain an ABN.

Separate bank account

A separate bank account has been opened so that money belonging to the fund can be kept separate from accounts of the members, the trustees and related employers (employer-sponsors).

[ ]

This is very important to prevent the fund contravening the SISA rules and also assists trustees in preserving and protecting their retirement income.

Accepting contributions

The trustees are aware of the SISA rules which relate to gainful employment and age restrictions for accepting contributions.	[ ]
The trustees are aware that funds can only accept contributions in accordance with their fund’s deed. The deed can also impose restrictions on the fund’s ability to accept contributions so trustees need to decide what contributions they wish to accept and to ensure the fund’s deed allows those contributions to be accepted.	[ ]
The trustees are also aware they cannot accept contributions from related parties in the form of assets other than money (known as ‘in specie’ contributions) except assets which are expressly allowed to be acquired from related parties under the SISA.	[ ]

According to my trust deed, the fund:

can accept contributions from a member’s employer	[ ]
can accept contributions from members	[ ]
can accept roll-over payments	[ ]
can accept contributions in respect of a member’s non-working spouse	[ ]
can accept contributions in respect of minors.	[ ]

Investment strategy

My fund has a medium to long term investment strategy that considers:

a wide range of investment possibilities including, for example, such things as: cash based, low risk investments; growth investments, for example shares; combinations of investment types.	[ ]
the return on investments compared with risks involved	[ ]
the ease of converting assets to cash in order to meet payments due by the fund	[ ]
members’ ages and individual retirement benefit needs	[ ]
overall, the aim of my fund’s strategy is to increase members’ benefits over time.	[ ]

Contravention of the requirement to have an acceptable investment strategy can result in the trustees being fined or sued for loss or damages. The fund can lose its compliance status and, as a result, its concessional rate of tax.

Investing

The assets of the fund are kept separate at all times from those of:
the members;	[ ]
the trustees; and	[ ]
related employers.	[ ]
Each member has a separate account in the fund.	[ ]
The fund’s accounting and banking records are kept entirely separate from those of members/trustees/employers	[ ]
All transactions by the fund are conducted on a strict commercial basis	[ ]
The fund can demonstrate that market value has been paid and received on all transactions.	[ ]

These requirements are very important to prevent the fund:

Contravening the sole purpose test and
exposing the members’ retirement benefits to unnecessary risk.

Investment restrictions

The trustees can demonstrate that they have not:

lent money to or provided financial assistance using the resources of the fund to a member or member’s relative	[ ]
borrowed money	[ ]
acquired assets from ‘related parties’ of the fund. Related parties include all members of the fund and their associates and all employer sponsors of the fund and their associates	[ ]
leased, loaned or invested more than 5% of the fund’s total assets in related parties of the fund. These assets are known as ‘in house assets’.	[ ]

Note: There are limited exceptions to the above restrictions and trustees should consult the fact Sheet Self managed superannuation funds —investment strategy and investment restrictions (NAT 2063) for a more detailed explanation.

Keeping of records

The trustees keep accounting records which:

comply with accounting guidelines for true and accurate accounts	[ ]
provide an accurate record of the true financial position of the fund	[ ]
will assist an approved auditor in reviewing the financial statements and preparing the annual financial and SISA compliance audit certificate	[ ]
will help members understand their retirement benefits	[ ]
will be kept for 5 years.	[ ]

Wherever possible, responsible accounting practices will be adopted by the trustees, such as:

joint signatories to signing of cheques	[ ]
separating of accounting functions, for example receipts and payments	[ ]
segregation of duties.	[ ]

Adopting responsible accounting practices:

protects the assets of the fund
guards against fraud
implements good internal audit practices
assists the approved auditor with the annual auditing of financial records
may reduce the time spent and the costs incurred in preparing the above records; and
will help protect the members’ retirement benefits.

The trustee must keep for 10 years:

minutes of all meetings	[ ]
records of changes of trustees	[ ]
records of changes of directors, if corporate trustees	[ ]
written consents by members to be appointed as trustee	[ ]
a hard (paper) copy of any returns lodged electronically with the Tax Office.	[ ]

Penalties apply if trustees fail to keep the records listed above for the required period.

Paying a benefit

The trustees:

will only pay benefits in accordance with the SISA, Superannuation Industry (Supervision) Regulations 1994 (SISR) and the trust deed of the fund	[ ]
are aware that the SISA sets payment standards based on events such as reaching a certain age, termination of employment etc and can place restrictions on how a benefit can be paid.	[ ]

All paperwork in relation to the following will be completed:

Eligible Termination Payments (ETPs)	[ ]
Withholding tax from ETPs and superannuation pensions and annuities and remitting the tax to the Tax Office	[ ]
Reasonable Benefit Limits.	[ ]

Benefits should be checked for accuracy, prior to payment. The payment standards of the SISA work with the sole purpose test and the preservation rules to ensure monies are only paid to members in appropriate circumstances

Annual requirements

The trustees will:

appoint an approved auditor to examine the records at the end of the financial year	[ ]
lodge the combined income tax and regulatory return (Form F)with the Tax Office by the due date	[ ]
pay the supervisory levy and the fund's tax liability, when due	[ ]
comply with Surcharge requirements.	[ ]

Penalties apply for failing to meet the annual requirements listed above.

Tax matters

Records will be kept by the trustees in relation to:

deductions claimed for administrative and operating expenses of the fund	[ ]
sales/purchases of assets for Capital Gains Tax purposes	[ ]
tax file numbers of members	[ ]
deductions claimed for the provision of death and disability benefits for members.	[ ]

Need more information?

For further information on this topic:

Visit the Tax Office superannuation website at www.ato.gov.au/super.
Phone the Superannuation Infoline on 13 10 20 for the cost of a local call.
You can write to:

Superannuation Business Line
Australian Taxation Office
PO Box 277
WTC VIC 8005

Obtain a copy of a fact sheet from A Fax from Tax on 13 28 60.
For legal and policy information visit law.ato.gov.au.

If you do not speak English and need help from us, phone the Translating and Interpreting Service on 13 14 50.

People with a hearing or speech impairment with access to appropriate teletypewriter (TTY) or modem equipment should phone the National Relay Service on 13 36 77.

People with a speech or communication impairment can communicate with the Tax Office using Speech to Speech Relay and should phone the National Relay Service on 1300 555 727.

NAT 2069

Last Modified: Monday, 28 July 2003

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