What you need to know about SMSF compliance

The Australian Taxation Office (ATO) and the Australian Securities & Investments Commission (ASIC) jointly have the responsibility to regulate SMSFs. ASIC is responsible for regulating the conduct and disclosure obligations of financial services providers, including superannuation trustees of registrable superannuation entities. It typically supervises trustee conduct to protect consumer interests. 

The ATO checks that your fund has implemented and is maintaining systems required for legal compliance. They’ll verify that your fund auditors are performing the function they’re supposed to and that the primary purpose of your SMSF is to pay retirement benefits to members. To facilitate SMSF compliance, the ATO will provide the information and forms you need to establish and operate your fund. They assess applications for early release of super on compassionate grounds. If your fund breaches SMSF compliance requirements or breaks the law in any way, the ATO will take enforcement action.

If you’re choosing to use an SMSF, the important SMSF compliance requirements you must fulfil are:

1. Appointing an auditor

You need to appoint an approved SMSF auditor each year at least 45 days before you need to file your SMSF annual return (SAR). The auditor must be registered with ASIC and have an SMSF auditor number. 

2. Asset valuation

When you draw up the fund's accounts, statements and annual return each income year, you need to value the assets at their market value. This valuation is required to verify compliance with multiple legal requirements that relate to any assets transferred to related parties and investments made at arm's length. 

3. SMSF annual returns

You have the responsibility of lodging the SMSF annual return (SAR), but you can do this after it has been audited.  The SAR includes information related to taxation, regulatory requirements and member contributions. It's a good idea to provide your ABN on your SAR, as this enables the ATO systems to match your members correctly. To lodge your SAR, you’ll need to pay the SMSF supervisory levy stated on your return and lodge it online at the Standard Business Reporting portal or via post by mailing it to the ATO. 

4. Event-based reporting of the transfer balance

Each fund member can only transfer a maximum amount of $1.7 million into retirement phase income streams in their entire lifetime. So your SMSF needs to report all transfer balance events so that the ATO can track each member’s transfer balance cap and total balance.

5. Diligent record-keeping

As a trustee, you’re responsible for maintaining proper and accurate tax and super records. You must prepare and provide minutes for all investment decisions, showing how a particular investment was chosen and whether all trustees agreed. You also need to sign the fund’s financial statements before finalising the audit each year. There is a list of records that must be maintained for at least five years and another that needs to be maintained for at least ten years. Check these lists and maintain the records for the stipulated duration. 

6. Notify the ATO of changes

Any changes in the trustees, directors of the corporate trustee, members, fund’s contact details, address or fund status must be notified to the ATO within 28 days.