Self Managed Super Funds (SMSF) need to be “managed” correctly. A lot of money can be tied up in SMSFs attracting substantial tax benefits. What happens to that money is subject to regulatory scrutiny.

To ensure that your fund works efficiently, you should be aware of some of the most common mistakes.

Poor record keeping

SMSFs are highly regulated and require that significant amounts of records be kept for administrative purposes and particularly, in case they are investigated by the ATO. We have written many articles and presented seminars on the significant responsibilities of trustees. If the ATO decides to look at your SMSF and your record keeping is less than what they require, you and the other fund members could face significant penalties.

Good record keeping and documentation makes all your fund decision making much more transparent and legitimate.

Loans to members

By law, a SMSF cannot offer loans or financial assistance to a member at any time. It may seem logical that because the money is the members’ money, allocating funds to members might be permissible. It is not.

Harsh penalties exist and the fund could lose all concessional tax benefits which would impact the entire fund and all of its members.

Exceeding contribution caps

If a member exceeds the annual contribution cap in a given financial year, your excess contributions may be taxed at 47 percent. As of 1 July 2017, the contribution cap for SMSF members, regardless of age, is $25,000 which is taxed at 15%.

Talk to us

If you are considering starting a SMSF, it is important that you get advice as there is a lot involved. Also, if you already run a SMSF and the administration is causing you concerns, consider taking advantage of our free 30 minute consultation and keep an eye out for our SMSF seminars.