Navigating EOFY: Your SMSF Preparation Guide

Navigating EOFY can be challenging, especially for Australians managing SMSFs. This guide provides a comprehensive checklist to help you prepare your fund the annual audit, ensuring you meet all ATO requirements.

If you’re an Australian Tax Resident with an SMSF, it’s crucial to ensure your fund is in good shape and prepared for the EOFY and the annual audit.

It’s particularly important this year, because the ATO is focussed on fixing a number of issues when it comes to SMSFs. These include high rates of non-lodgment and problematic related party loans by SMSF members operating small businesses.

Ensure Your SMSF Paperwork is Up-to-Date

Review all the administrative responsibilities of your SMSF to identify any incomplete ones. These include updating the fund’s minutes to record all decisions and actions taken during the year, lodging any required Transfer Balance Account Reports (TBARs), and documenting decisions about benefit payments and withdrawals.

Although it’s easy to forget, SMSFs are required to keep all contact details, banking details and electronic service address up-to-date with the ATO.

Prioritise Early Contributions and Payments

If you want a super contribution counted in the 2022–23 financial year, ensure the fund’s bank account receives payment by 30 June.

Minimum pension payments to members also need to be made by 30 June to meet the annual payment rules and ensure the income stream doesn’t cease for income tax purposes.

Prepare Your Contribution Administration

If your SMSF receives tax-effective super contributions for salary sacrifice arrangements, ensure the fund has all the necessary paperwork before the arrangements commences.

Check you have appropriate evidence (and trust deed authority) to verify any downsizer contributions. From 1 January 2023, SMSF members aged 55 and over are eligible to make a downsizer contribution of up to $300,000 ($600,000 for a couple).

Timely Lodgment of Your Annual Return

Non-lodgment of the annual return is a major red flag for the ATO, particularly for new SMSFs.

Ensure your annual return is prepared and lodged on time to avoid coming under the tax man’s microscope for potential illegal early access or non-compliance.

Understand the Implications of New Tax Rules

The planned new tax on member balances over $3 million could create significant issues for some SMSF members, so trustees should review the potential implications ahead of EOFY.

Funds with large, lumpy assets such as business real property should consider the implications and liquidity issues of members implementing strategies designed to limit the impact of the new tax.

Accurate Valuation of Your Fund’s Assets

SMSF rules require all fund assets to be valued at market value at year-end, including investments in unlisted companies or trusts, cryptocurrency, and collectible assets. The ATO is monitoring this area, so trustees should organise appropriate valuations as soon as possible.

Ensure valuations can be substantiated if there are audit queries and the process is undertaken in line with valuation guidelines.

Reevaluate Your Investment Strategy

Review the fund’s investment strategy to ensure it covers all relevant areas, including whether investment asset ranges remain relevant to your investment objectives. Deviations from strategic asset ranges must be documented, together with intended actions to address them.

Review your NALE

Non-arm’s length expenses (NALE) and income are key interest areas for the ATO, so check the fund complies with the rules.

Pay particular attention to all SMSF transactions involving related parties and ensure their arm’s length nature can be fully substantiated.

Get your auditor onboard

Trustees are required to appoint their auditor at least 45 days before lodgment due date, so ensure you have this organised.

Prepare for earlier TBAR reporting

From 1 July 2023, SMSFs will be required to report TBARs more frequently. All TBAR events will need to be submitted 28 days after the quarter in which the event occurred, so ensure you have systems in place to meet the new requirement.

All TBAR events occurring in 2022-23 will need to be reported by 28 October 2023.

Ensure trustees have a director ID

SMSF with a corporate structure must ensure all trustees have a director ID number. Although this was a requirement from 1 November 2022, many SMSF trustees are yet to apply.

Holding a director ID is an essential part of the SMSF registration process and directors must apply via the Australian Business Registry Services website.

If you would like to discuss EOFY tasks for your SMSF or your personal super contributions, contact us today.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.