SMSF annual returns: avoid the top 5 mistakes

SMSF annual returns: avoid the top 5 mistakes

For anyone with a self-managed super fund (SMSF) at 30 June 2019 or has wound up an SMSF during the last financial year, your SMSF annual return for 2018-19 may be due. This annual return must be lodged with the ATO even if your SMSF does not have a tax liability. This year, there are concerns that a “significant” number of SMSFs (90,000 of the total 600,000 population) appear not to have lodged an annual return.

A warning has been issued by the ATO to those that haven’t lodged that their fund may be made non-complying or have penalties imposed. To assist those lodging the annual return, the ATO highlighted some new labels, including a crypto-currency, downsizer contributions, outstanding limited recourse borrowing arrangement amounts, and non-arm’s-length income. In addition, it has also released a list of most common mistakes to avoid when completing the returns:

  • Lodging a return without auditor details – where a return is lodged without auditor details, it will not be recognised as a lodgment and the complying status of the fund will be impacted.
  • Not valuing SMSF assets at market value – ATO will accept valuations where you can demonstrate the valuation has been arrived at using a “fair and reasonable process” and depending on the asset, a qualified independent valuer may be required.
  • Lodging a return with nil assets – if your SMSF is in its first year and you have no assets yet that has been set aside for the benefit of members, instead of lodging a SMSF annual return, you will need to let the ATO know to either cancel your fund’s registration or flag the SMSF’s record as Return Not Necessary (RNN). The only SMSFs that can lodge a return with nil assets are those being wound up.
  • Bank account not unique to the SMSF – bank account that you use for your SMSF must be separate from the trustees’ individual bank accounts and any related employers’ or advisers’ bank accounts.
  • Incorrect electronic service address – it is not an email address or the contact details of the SMSF messaging provider. If your SMSF does not have an electronic service address, you can apply to one of the many external providers for one.

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