SMSF Mistakes to Avoid

There are a number of common mistakes we see during preparation of financial statements and year end compliance for Self-Managed Super Funds. The ATO takes SMSF compliance seriously, and there can be severe penalties for trustees who breach their obligations including disqualification.

Some of the mistakes we see:

Failing to Pay the Minimum Pension by 30 June

Failing to pay the minimum pension technically causes the pension to cease for that year. This directly affects the fund’s tax position, as the pension account loses is tax-free status. Associated earnings will revert to being taxed at 15%.

In our year end signing letter we will always stipulate the minimum pension that is required to be paid to maintain the pension exemption, we will also write or speak directly with trustees before financial year end to ensure the minimum pension has been paid.

Division 293 Payments

If your income for surcharge purposes was greater than $250,000 and concessional contributions have been made on your behalf during the year, then you should expect to receive a Division 293 tax assessment from the ATO.

This is an additional tax of 15% that must be paid either personally or released from your super account. If releasing from your SMSF there are key steps that need to be followed – especially for those members who are not in pension phase. A Division 293 Election must be completed online (through MyGov) or ask for our assistance. If we are managing your super fund, we will then provide you with the payment slip in order to make payment. Please do not pay the Division 293 tax assessment from your super fund directly without lodging an election or receiving the payment slip. Direct payment without the due process can constitute unauthorised early access.  

Mixing Personal and Super Fund Bank Transactions

Sometimes mistakes happen and a personal bill is paid from the SMSF bank account. It’s imperative to keep personal and SMSF bank accounts and transactions separate.

Even an inadvertent personal payment from the fund is considered a breach of the Superannuation Industry (Supervision) (SIS) Act and may be treated as a prohibited loan to a member. If you realise you have made an error like this, please contact us immediately so we can help you before year-end.

Failing to Strictly Follow Commercial Lease Terms

Auditors closely scrutinize the lease terms of commercial properties owned by an SMSF, especially when they are leased to a related party (like your own business).

Trustees must deal with the tenant on a strict, arm's-length basis. This means:

• Market-rate rent must be paid - evidence is required to support the market rent.

• Rent must be paid on time, every time.

• All other lease terms (like insurance obligations or outgoings) must reflect standard commercial market conditions.

Final Thoughts

Self-Managed Super Funds offer trustees flexibility and control over their retirement strategy, but the rules are complex and continually changing. Trustees must take their duties seriously to ensure they stay compliant and in control of their fund.

If you have any questions about the above or self-managed super funds in general, please feel to reach out.