The Rules have changed for SMSF

By Peter Vickers Business Group | superannuation, Investment, financial advice, finance |

Here’s what we are doing at Peter Vickers to ensure you get the Best Results.

Accounting and Audit expenses

Peter Vickers invoice separately for any accounting and tax services provided to the fund and separately any fees by one of our three registered SMSF auditors who carry out the audit of the superannuation fund.

It’s important to ensure you pay invoices from SMSF because:

On 2 October Royal Ascent was given to the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Act 2019. This changed the Non Arm’s Length Income rules (abbreviated to NALI).

You might ask what have expenses got to do with income?The answer is the change added two subsections that stated that if the fund incurs an expense that is lower than it should be or does not in fact incur an expense that it should have then the NALI rules apply.

These amendments are backdated to 1 July 2018 and thus apply for the 2018/19 and 2019/20 years. However, understanding that this back dating is not appropriate a Draft Practical Compliance Guideline PCG 2019/D6 was issued on 2 October 2019 which said the Commissioner of Taxation would not allocate compliance resources to the 2018/19 and 2019/20 years. Example 2 in Paragraph 18 of Draft Law Companion Ruling LCR 2019/D6 then caused an uproar in the tax community as it mentioned accounting fees which was also repeated in the PCG 2019/D6.

The income tax return for an SMSF asks the question what were the audit fees for the fund? For many of our clients the audit fee was included in their invoices from us to their other entities who then paid the invoice. Thus the fund paid no fees and our answer was zero.

Each SMSF auditor has their own registration number issued by ASIC. This is also noted in the tax return of the SMSF. The regulator for SMSFs is the Australian Taxation Office. There was unverified gossip in the tax community that some funds included an auditor’s number when that auditor had not actually audited the fund. The worst crime to a regulator is such a breach. It’s like lying to a court which is called perjury. The ATO then asked its IT team to run statistical analyses of SMSF tax returns to see if they can identify these evil funds. All three auditors in the firm received letters asking if we had audited all the funds that carried our number. We of course had. The ATO then ran a test of the audit fee field and also tried to compare the name of the auditor with the name of the contact person on the return. We use the contact name of the most senior person of that office as we want any issue raised by the ATO to go to the top. We have since heard that some firms put the name of the office cleaner so that the seniors do not have to talk to the ATO. We find this completely stupid.

Covid-19 Attacks Super Funds

The share market has dropped considerably since its high point on 20 February. A contrarian view is the drop is caused by the market coming to its senses rather than the virus caused pending recession. Anyway in order to preserve the capital invested in super it has been announced that the minimum pension payments which have a rate of 4% to 9% for under 90s has been halved to 2% to 4.5%.

For those funds where we have already given you this calculation please change the number to half. This is a minimum that must be paid to ensure that the fund is exempt from income tax. If you need more money than this to live on then do not worry as there is no maximum. This does not apply to 3 of our clients that have old market linked pensions. Nothing has changed there.

If your fund owns your business premises and you rent this to your operating business at market rent then in line with the National Cabinet Mandatory Code of Conduct on Commercial Leasing, the rent is able to be adjusted. There are many issues involved here and no simple suggestion for an email like this. Please talk to your accountant to discuss this.

Besides regular washing of hands, hard and smart work will get us through the coming recession.

Our greatest benefit to you is the advice that we can give you.

Yours sincerely

The team @ Peter Vickers Business Group

If you’d like more information on how these changes will affect you , or more broad advice on how to grow your SMSF, please contact one of our SMSF and investing experts using the button below.

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