The Five Most Common SMSF Mistakes According to the ATO

As the saying goes “No one is perfect”. Unfortunately, the same is true with accountants, as much as we try to deny it! To prove it, the ATO has released a list of the top five most common issues found on lodged SMSF Annual Returns:

1. A bank account that isn’t unique to the SMSF

Hopefully just an oversight and not an indicator of a bigger issue! All SMSF monies need to be kept separate from any personal accounts. The bank account nominated on the SMSF Annual Return must belong to the SMSF to accept contributions, rollovers of super and income from investments. This account much not be a client’s personal or business account.

2. Providing an incorrect electronic service address (ESA)

As part of the SuperStream changes, all SMSFs must arrange an Electronic Service Address (ESA) for any members receiving contributions from non-related employers. There are many providers for these, so the ESA is likely to differ for multiple funds.

The common mistake here is for an email address or other contact details to be entered in this field rather than the actual ESA.

SMSF Australia has our own ESA which we provide for our funds to use for free.

3. Not valuing an SMSF’s assets at market value

SMSF assets held by the fund must be calculated at market value, and need to be revalued at June 30 each financial year (or every three years for property). It is important that this is reflected in both the financial statements and the income tax return.

“If you follow our valuation guidelines, we’ll generally accept the valuation you provide,” the ATO said.

These should then be independently verified by the auditor as part of their processes. Investment valuations are particularly important in pension funds as they will affect the minimum and maximum drawdown amounts.

4. Trying to lodge with zero assets

With the exception of SMSFs that are being wound up, you cannot prepare a zero-balance return. This is due to a fund technically not existing until it has assets – usually this is an initial contribution or rollover from another fund.

In cases where the fund was established in one financial year, but did not receive its first deposit until the next financial year, the accountant should contact the ATO and request a “Return Not Necessary (RNN)” rather than lodge a zero-asset return.

5. Lodging an SAR without auditor details

As all SMSFs need to be audited before they can be lodged, you need to ensure you appoint and give the auditor enough time to complete their work before the Fund’s lodgement deadline – we recommend clients have everything to us at least a month before their due date. While this can be an easy oversight, it is always best to confirm all your auditor details are correct and the audit date matches the signed audit report.

As always, having robust processes and checks will prevent the majority of these minor errors – something we are more than happy to assist with at any time! For a free, no-obligation chat, call us today on 1300 392 544 or get in touch online.

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