Retrospectivity issues flare up for SMSF professionals
With events-based reporting now in full swing, some practitioners have been encountering problems with prospective types of advice, particularly in the lead up to the end of financial year.
Speaking in a recent webinar, Kath Bowler from Licensing for Accountants and Aaron Dunn from Smarter SMSF reminded practitioners that when engaging with SMSF clients, certain events need to be dealt with on a prospective basis.
SMSF practitioners have been warned previously about some of the dangers of retrospectively documenting the partial commutation of a pension after payments have occurred as the law requires SMSFs to have these documents in place before the payment is made.
In the past, some accountants would prepare this documentation when they did the tax return for the SMSF and state that the trustee had requested the payment be made as a lump sum instead of a pension.
While the law hasn’t actually changed around this, the introduction of the events-based reporting means it is more difficult to change documentation after the payments have occurred and could create a red flag, David Moss from Merit Wealth explained previously.
Ms Bowler said she has already seen quite a few practitioners encounter some difficulties around 30 June this year, because they were trying to be retrospective and ran into issues.
Speaking to SMSF Adviser, Ms Bowler said there are tax advantages in only taking minimum pensions and sourcing additional income needs through lump sum withdrawals.
Normally, the accountant would provide guidance around that at the end of the year once the money has already been taken out. [However,] that guidance needs to be provided before the event happens, she explained.
“It wasn't really possible before [either], but with the amount of documentation that exists now, it is just really shining a spotlight on where backdating did occur,” she said.