With the end of the financial year approaching, it’s time to assist your SMSF clients to get their SMSF in order and perhaps avoid any unintended compliance issues.
Review the Investment Strategy
The Investment Strategy is one of the documents that is carefully reviewed by the auditor to comply with legislative requirements and ATO expectations. It should be reviewed regularly and updated as needed to ensure that it meets the needs of the members and the SMSF’s risk profile. Based on feedback from the ATO, the auditor is expecting to see a strategy that is tailored and specific to the SMSF, rather than a repeat of the legislation. They expect that the strategy will outline how the fund investments meet each member’s retirement objectives and goals and that it includes a detailed discussion of the selected investment assets that considers risk, return, liquidity, and diversification. This is particularly important if an SMSF has a single asset such as a property making up the majority of the fund’s assets or it holds other investments that may be considered risker or less liquid, for example properties held via limited recourse borrowing arrangement, unlisted shares and Cryptocurrency.
Our sister business, Best Practice SMSF, has developed some handy Investment Strategy Checklists that can assist you and your clients – get access here – https://www.bestpracticesmsf.com.au/shop
Review Contributions
When reviewing contributions, it is important that you have all the information. The concessional contribution caps can be different for each member as some members may have access to carry forward contribution caps. The carry forward amount, however, is dependent on their Total Super Balance (TSB). This means all balances and not just the member’s balance in the SMSF. Check that all the member’s super is linked to their MyGov account so you can see what the ATO have recorded as their TSB. Also check all records with your client to make sure that this balance is correct, particularly in relation to accounts held outside the SMSF.
Other aspects of contributions to consider:
If the member is over 67 years of age and wants to claim a personal tax deduction, have they met the work test?
Will contributions be received in the SMSF’s bank account by 30 June?
Have the members paid any expenses on behalf of the SMSF such as accounting fees or property expenses?
Market Valuations & In-House Assets
Your clients are now required to value SMSF assets annually. Ensure that you have the Trustees getting up to date valuations as close to 30 June 2023 as they can for all investments, including property and collectables. It may be worthwhile to chat with the SMSF’sAuditor to ensure that you understand what they will be looking to see to sign off the audit.
If the SMSF is carrying an In-house Asset you will need to review the estimated valuations of assets to see if there is any action required to keep the value of the in-house asset under the 5% limit as at 30 June. Be mindful that correcting a compliance breach relating to exceeding the 5% limit can be difficult and, in some circumstances, can only be fixed with the sale of the asset.
Cryptocurrency
Due to the high-risk nature of Cryptocurrency, SMSF Auditors are understandably nervous about getting the comfort they need to sign off the audit. If your client has gone out and got themselves some Crypto in their SMSF, as their Adviser or Accountant you are perfectly placed to educate them on what the SMSF Auditor will want to see at audit time. This might include:
Updated Investment Strategy covering off specific risks
Wallets addresses
Screenshots of wallet at 30 June
Reconciled Tax reports
It is important that your clients are aware of what they need to do on or around the 30th June each year.
Pension Payments
A reminder that the 50% minimum still applies for year ended 30 June 2023. When reviewing pension payments, make sure that the minimum pension has been met or exceeded and received by the member on or before 30 June. Waiting until 30 June to make any required payments may be a costly mistake.
The reduction no longer applies from 1 July 2023 so it will be important to revisit periodic payment amounts so your clients meet their 2024 minimum pension requirements.
Additional Tips for End of Year Planning for your SMSF Service
In addition to the tasks listed above, the end of the financial year is a great time to review how you manage your SMSF clients. This can include:
Reviewing your current software provider and ensuring you are using all of the features of the product effectively.
In-house accounting versus outsourcing. If you are currently managing all of the accounting functions in-house, the end of the financial year is the perfect time to review whether partnering with a reputable SMSF administrator could give you a better outcome. An SMSF administrator can help trustees with a variety of tasks, including record keeping, tax returns, and compliance. Using a reputable SMSF administrator can help Accountants and Advisers to save time and reduce the risk of errors.
Identify value add services – are there any new products on the market that could assist you developing new revenues streams to add value to your current service.
At Keep It Simple Super we value working with our clients to ensure simple processes and simple outcomes. If you want to avoid complex and costly outcomes for your clients, speak to us today to get access to our award winning SMSF Administration service.