What are the 6 key obligations of running a SMSF?

SMSF’s are now the largest and fastest growing segment of the superannuation industry. More and more Australians are taking control of their retirement savings and establishing their own SMSF. According to the ATO there were over 480,000 SMSFs as at June 2014 with 35,276 new SMSFs established in the 2013/14 financial year alone.

Total assets held within SMSF’s as at June 2014 were valued at approximately $440 billion accounting for over 30% of the $1.38 trillion superannuation dollars. These figures demonstrate that Australians have certainly embraced SMSFs as a useful tool to save for their retirement.

Continuing growth in the number of SMSF’s illustrate the important role that they play for retirement saving and estate planning for many Australians.

Being a trustee of a SMSF is an important role and comes with it increased responsibility and obligations. The following six tips provide a simply introductory guide to understanding some of these key obligations.

Ongoing Compliance

New trustees should become educated about the compliance requirements for running a SMSF. All new trustees must sign a New Trustee Declaration within 21 days of becoming a trustee. The declaration contains information on general trustee duties, investment restrictions, the sole purpose test, record keeping and reporting obligations, among other issues.

Trustees should aim to have good compliance procedures in place from the start. Plan well to always meet deadlines.

Administration

The administration of SMSFs can be delegated to a professional administrator such as The SMSF Club. New trustees need to understand that a delegation of duties isn’t a delegation of responsibilities. You will still be responsible for the compliance and observing the rules for your SMSF even if you delegate administrative tasks.

Recording Keeping and Reporting

Set out good reporting practices from the start. These flow on from understanding compliance, keeping up with compliance procedures, and good administration. Keeping good accounting records, lodging returns and forms on time, and getting a professional SMSF audit are all essential features of good reporting practice. Again, with the help of The SMSF Club we can ensure that you comply with these requirements.

Good reporting practices will allow you to provide an accurate and detailed history of your fund, help you make decisions for your SMSF, and demonstrate to the ATO and auditors whether you’ve complied with superannuation laws and regulations.

Your records may include:

• Minutes of meetings and decisions
• Trustee declarations
• Annual audit records
• Audit reports
• Investment strategies
• Registration documents and ownership and investment documents
• Notices of compliance
• Tax returns
• Operating statements
• Bank account statements
• Tax Management

If you already have a good tax management strategy in place, that’s a great start. Otherwise, obtain advice from SMSF professionals, preferably before setting up your fund as the structure will affect your tax liabilities.

Remember you’ll need to lodge a tax return on an annual basis for your SMSF. Your SMSF audit report needs to be available at the same time your tax return is lodged.

Investment Strategies

By their nature, SMSFs will tend to incorporate longer term investment strategies, although this can vary depending on the individual SMSF and its members. A good starting point is to clearly set out your investment objectives, ensuring that they are realistic. Appropriate diversification, whether to invest across a number of asset classes, meeting the costs of running the fund, and individual needs of members need to be taken into account. The SMSF Club specialises in SMSF investment education, by being a member of The SMSF Club you gain access to investment experts across all asset classes.

Consulting with Professionals

Knowing when to get professional advice is important if you’re running a SMSF. Changing laws and regulations, as well as the complexity of tax law means it’s often a good idea for SMSF trustees to get regular assistance from SMSF professionals. This can help you with notjust compliance and the day-to-day administration issues, but also investing and tax strategies. In the event you have any doubts, consult with a professional immediately.