What is SMSF Compliance?

Running a Self-Managed Super Fund (SMSF) can be very rewarding, providing you with a lot of control over your retirement savings.

However, it also comes with a lot of responsibilities, particularly around compliance matters. Making sure you are running your fund correctly is possibly the most challenging aspect.

The superannuation system is an important part of Australian society – it’s there not only to reduce the impact of retirees on the budget, but also to ensure you are rewarded for your lifetime of hard work.

What is SMSF compliance?

SMSF compliance is about ensuring and proving you are operating your fund in line with the law. There are a lot of advantages given to SMSFs, and in return the government requires you to show that you aren’t misusing them.

Self-managed super funds allow you a great deal of power over where and how you invest for your retirement, but as the saying goes, with great power comes great responsibility. There are a lot of aspects to consider when ensuring your SMSF is compliant, but as long as you take the time to establish the right procedures, it shouldn’t be that daunting of a prospect.

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You don’t need to go it alone

The first aspect of super compliance you may want to consider is, how much you are capable and want to do yourself. Strictly speaking, the only outside help you need is appointing an annual auditor of your fund. However, running every aspect of a SMSF is not only time consuming and complicated, but a lot of it could be beyond your financial knowledge or comfort. Not everyone is a professional investment manager after all!

If you don’t feel comfortable running a particular aspect of your fund, there are a range of service providers out there who can help to administer all or part of your compliance requirements. However, in exchange for taking the burden off your hands, you will generally have to pay somewhere around 1-4% of your account balance each year in fees, depending on the level of administration and the particular service provider.

If you do go down this road, make sure to do your research beforehand. Don’t just pick the cheapest because it’s the cheapest, but also don’t just assume that a more expensive provider is necessarily better for your needs than a cheaper one. You should also carefully consider which aspects of administration you want to hand over, as you could potentially save yourself some money if there are parts you feel confident running yourself. Also, you need to remember that even if you delegate the majority of the administration of your fund, you are still ultimately responsible for the management of the SMSF as the trustee.

What do you need to do for your SMSF to be compliant?

No matter how much of your compliance you want to do yourself or seek outside assistance with, you should still be aware of the compliance requirements for your fund. As long as the SMSF exists, there will be ongoing compliance requirements. Some of these requirements must be completed once a year, while others are more of a continual, ongoing requirement.

The annual SMSF compliance requirements are:

  • Valuing the fund’s holdings as at 30 June
  • Preparing end of year statements
  • Appointing an auditor at least 45 days before the annual return is due
  • Lodging your annual return
  • Lodging any required transfer balance account reports
  • Paying minimum annual income stream payments as required
  • Obtaining an actuarial certificate if needed.

The ongoing compliance requirements include ensuring:

  • The investment strategy is regularly reviewed
  • All funds and assets are separate from personal accounts
  • All investments comply with super regulations
  • All contributions are received in accordance with the law
  • All benefits are paid legally
  • All appropriate records are created and maintained as required

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Make sure you keep your records

The record keeping requirements are particularly important. Not only are they required for the auditing process, but they also help to protect you in case things go wrong. If you have an investment that fails, for example, then having the records showing the thought process behind the decision, and whether the other trustees agreed at the time may help to head off any potential legal action.

There are different timeframes you are required to keep different documents. These include:

  • Documents that need to be maintained for five years
    • Records of the transactions of the fund
    • Records of the funds financial position
    • Annual operating statement
    • Annual fund financial position
    • Annual lodged returns
    • Any documents lodged with the Australian Tax Office (ATO) or other super funds
  • Documents that need to be maintained for ten years
    • Minutes of trustee meetings and decisions
    • Records of trustee changes
    • Declarations for all trustees recognising their obligations
    • Declarations for all trustees assenting to be appointed as such
    • All reports given to fund members
    • Records of all decisions regarding the storage or personal use of assets

All of these documents need to be written, in English and readily accessible. If you store these records digitally, ensure that they are in a format accessible by the Australian Tax Office and are able to be verified by the ATO. You can find out more about the ATO’s compliance requirements on their website.

If you are managing a SMSF, it’s important to make sure that you comply with all the applicable regulations. If you’re unsure about any aspect, seek independent financial advice. For more about SMSFs and to compare SMSF products, click here.

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