Another 30 June is rapidly approaching and that makes it timely to review the activities of your superannuation fund for the 2010 year to ensure that your fund is fully compliant and that there have been no potential contraventions of the regulations during the year.
The Australian Taxation Office (ATO) is constantly increasing its compliance activities in relation to superannuation funds and imposes strict obligations on Auditors to report any material contraventions of the regulations direct to the ATO. The majority of potential breaches are inadvertent and can often be quickly rectified which can mean that the Auditor may not need to report the breach or if he is required to report to the ATO he can explain the mitigating circumstances and rectification already undertaken.
We have detailed below some of the common areas where issues arise and we would recommend that you review your superannuation fund prior to 30 June to ensure that you don’t have any similar issues. Naturally, if you would like any assistance with any of these matters, or you believe you may have a potential problem, please do not hesitate to contact us as soon as possible to discuss any issues you may potentially identify.
Issues to Consider
There are various limits imposed on contributions that can be made to a superannuation fund. These limits are quite complex and vary depending on your age, employment circumstances and amount of contributions made in earlier years.
Excessive contributions tax of 31.5% can apply to concessional contributions in excess of the aged based caps. Concessional contributions are generally employer contributions or deductible member contributions. The age based caps have been reduced for the 2010 year and are:
Age at 30 June 2010
< 50 years
> 50 years
If you are making any contributions in excess of the above levels, please contact us to ensure that you do not exceed the non-concessional limits.
If your fund is in pension mode for any of the members, it is essential that the minimum pension payments are made prior to 30 June 2010. We are currently finalising the minimum pension calculations for 2010 for all of our clients. If you have not yet received details of the minimum pension, please contact us immediately and we can discuss it further with you.
It is a requirement of the superannuation (SIS) legislation that a self managed superannuation fund have a documented investment strategy.
It is important to regularly review your investment strategy to ensure it is still appropriate for your circumstances and that the investments made by the fund comply with the strategy. It would be worthwhile taking the opportunity to review your investment strategy with your Investment Adviser. If you do not use an Investment Advisor, we would be happy to explain to you the minimum requirements of an appropriate investment strategy, although under ASIC rules we are not able to give you specific investment advice.
It is essential that all assets owned by the superannuation fund are recorded in the name of the Trustee as trustee for the superannuation fund. If you have acquired any assets during the year it is important to ensure that they are appropriately recorded in the correct name noting the name of the Trustee and the name of the superannuation fund. If you have any existing investments or new investments that are not recorded in the correct name these should be rectified immediately. If you would like any assistance in doing this please do not hesitate to contact us.
Assets of a superannuation fund cannot be used for personal or business purposes unless the member has met a condition of release. We have noticed over the years that sometimes payments can be made using the incorrect cheque book or from the wrong internet banking account and this can cause an inadvertent contravention of the regulations. We recommend that you review any withdrawals from the superannuation fund account to ensure that you have not made any inadvertent transfers out of the fund to members or their associates. If this has occurred please contact us immediately and we can help you identify a rectification strategy.
It can be quite common that dividend cheques or other investment income belonging to the superannuation fund can be inadvertently deposited to incorrect bank accounts not in the name of the superannuation fund. Similarly, deposits can sometimes be made into the superannuation fund bank account, which do not belong to the superannuation fund. If you think you may have money deposited into the wrong bank account, please contact us and we can help you determine the best way to rectify the situation before 30 June.
Assets Leased to Related Parties
There are certain situations where a superannuation fund is allowed to lease assets to related parties. If you have any of these investments, please ensure that the lease agreement for the asset is current and that the appropriate rent has been paid to the superannuation fund for the 2010 year. It is also important to review the terms of the lease to ensure that the rent is calculated on arms length terms and is equivalent to the commercial rental that could be achieved if the asset was leased to an unrelated third party.
Valuation of Unlisted Assets
It is always important to ensure that the values of assets in a superannuation fund are carried at their market value. Listed shares and similar assets can be valued readily by reference to their ASX market price. However for other assets such as property investments it is essential to have regular valuations of the property. Such valuation should be done at least every 3 years or when there have been significant changes in the market that could impact the valuation. The best form of valuation is an independent valuation. However, often the superannuation fund Auditor will be satisfied with an appraisal from an independent Real Estate Agent. If you have any properties that need to be valued this year and you would like assistance please do not hesitate to give us call.