Making sure you’re compliant before 30 June

With two weeks until the end of the financial year, your clients need that extra TLC to remind them of certain obligations which must be met before 30 June to ensure their SMSF’s are compliant. Based on our experience of what can go wrong, we have prepared the following points to assist you in this process.

Timing of Contributions:

Trustees will often make last minute concessional and non-concessional contributions to the Fund by way of electronic transfers. The ATO released TR2010/1 which states a contribution is recognised once it is received by the fund and specifically refers to electronic transfers. To ensure the timing of the contribution does not become an audit issues, trustees should ensure contributions are transferred at least a few days before Friday the 27th to ensure they are in the Fund’s bank account by Monday the 30th June.

Assets leased to related parties:

Trustees tend to be lenient towards related party lease arrangements and it is common that we see delayed rental payments and in some cases some, or all of the rent will be outstanding at year end. Unpaid rent is seen as not dealing on an arm’s length basis under section 109 of the SIS Act. Would a trustee allow an unrelated party fall behind payments for long periods? Therefore to ensure this doesn’t become an audit issue, trustees should ensure all rental receipts are up to date by 30 June.

Unpaid Present Entitlements:

Where an unpaid present entitlement owing to a fund from an investment in a related party is outstanding for more than one year, the amount is recognised as a loan and therefore will be an in-house asset. This treatment has been confirmed by the ATO in SMSFR 2009/3 and therefore if the distribution is significant, the Fund may breach the in-house asset provisions. Therefore, trustees should ensure any distributions owing from the 2013 financial year are received by the fund by 30 June 2014.

Pension Payments:

As you are all aware, where the requirements of a pension have not been met in a particular year, the ATO’s position in TR2013/5 is that the pension ceases for tax purposes. A result of this is that the fund will not be able to treat income earned by the assets supporting the pension as exempt from the time the pension ceased. Therefore it is imperative that minimum pension payments are physically made for each superannuation income stream before 30 June. The minimum payment required for each age bracket is referred to in the table below: