Multiport, ATO identify SMSF compliance weaknesses
The ATO and SMSF admin provider Multiport have identified new and ongoing SMSF compliance weaknesses and flagged potential upcoming issues with collectable assets.
Speaking to SMSF Adviser, a spokesperson from the ATO noted the top contraventions reported in auditor contravention reports involve breaches of the sole purpose test, related party loans, in-house assets and financial assistance to members.
Loans to members in particular remains on ongoing concern, with Stuart Forsyth, ATO assistant deputy commissioner, superannuation, recently stating approximately one fifth of SMSF contraventions involve loans to members.
“[Trustees] shouldn’t be making loans to members, I think I’ve said that every year for the last five years,” Mr Forsyth said.
“We understand the temptation; if [a trustee] can’t deal with that temptation, encourage clients not to have an SMSF. Nobody needs to have one, and not everyone should have one. Some people just can’t do it,” he said.
Also speaking to SMSF Adviser, Multiport’s technical services director Phil La Greca said there are several issues related to borrowing that cause compliance concerns.
For example, some trustees don’t realise the importance of sequencing with borrowing arrangements, he said.
“Trustees need to make sure that they actually get the steps in the right order. That still is a major problem within the borrowing rules,” Mr La Greca said. “They have to have all the right arrangements in place before they actually go out and buy a property or sign a contract.”
“The problem is you’ve got another sector out there that is actively promoting [property] and they can’t necessarily give advice around the SMSF space – they can’t say ‘Well you have to have the SMSF before you buy the asset’ and there sometimes can be a bit of pressure to sign the contract.”
Mr La Greca also said market valuation is an ongoing cause of “angst” in the sector, with confusion arising from working out when new market valuations are necessary.
“For things like property, giving a value or trying to determine what the appropriate value is for it every year is an interesting exercise,” he added.
Mr La Greca also pointed to issues around benefit payments, with confusion often arising from trustees not being clear on when they can access their superannuation assets.
He also noted that SMSF practitioners should remind their clients that new rules regarding holding collectables in an SMSF come into full effect on 1 July 2016.
“They’ll have to start preparing relatively soon, because finding out about insurance and storage could take some time,” he said.
“I think that could be a ‘watch this space’ for the next period, to see how the existing block of collectables, the grandfathered block of collectables, meet the new rules over the next 18 months.”