Expert warns SMSF trustees to be diligent at tax time

author-avatar By
on February 16, 2022 Fact Checked
Expert warns SMSF trustees to be diligent at tax time

The deadline for lodging annual self-managed super fund returns is 28 February.

SMSFs can be a tax minefield, and H&R Block's director of tax communications Mark Chapman provided a few tips for trustees this tax time.

He said the biggest factor is ensuring the fund passes the sole purpose test.

"The fund needs to be maintained for the sole purpose of providing retirement benefits to the members, or to their dependents if a member dies before retirement," Mr Chapman said.

In addition, the super fund can’t lend money to members or any trustee, or the relatives of trustees.

"If an SMSF lends money to a trustee or a relative the ATO could declare your fund non-compliant and levy significant tax and penalties.

"Also, bear in mind that SMSF assets can’t be used for personal benefit, such as buying a holiday house for private use.

"Make sure that, following that example, the holiday house is only rented out to non-related parties.

"No more than 5% of your SMSF can be invested in ‘in-house assets’, such as an investment in your own business."

Mr Chapman also said it's important to lodge the return and pay the supervisory levy, which is $259.

Not doing so could make your fund non-compliant and attract unnecessary heat from the tax office.

"Avoid misreporting and calculation errors with SMSF annual returns. Ensure all assets are re-valued to their current market value before starting to pay a pension," Mr Chapman said.

"Keep all documents used to prepare the SMSF's annual return."

SMSF investment strategies must also generally be reviewed once a year.

Not being compliant in the eyes of the Australian Tax Office could attract penalties of up to 50 penalty units, with each unit worth $222.

Managing crypto assets at tax time

In the eyes of the ATO, cryptocurrencies are not money but are assets subject to Capital Gains Tax.

While a relatively small portion of assets held by SMSFs - $212 million as at June 2021 - cryptocurrency is a burgeoning SMSF asset class. 

H&R Block's Mark Chapman reminded SMSF trustees to ensure the trust deed covers crypto assets.

"Whilst many newer funds may have this power written into the trust deed, many older funds - that long pre-date the development of cryptocurrencies - may not have it meaning that it may be necessary to vary the fund rules before proceeding with the investment," he told Savings.com.au.

H&R Block has partnered with CryptoTaxCalculator, a software platform that performs complex crypto calculations to ensure all tax obligations are met.

The platform is able to consolidate all digital transactions across multiple wallets, calculate capital gains and losses of the previous year, and calculate tax payable on each trade.

According to H&R Block Australia managing director Brodie Dixon, cryptocurrencies can be complex when it comes to tax returns.

"Contrary to popular belief, the anonymity of the digital world does not translate to the licence to ignore tax obligations - the Australian Taxation Office having warned that data from banks, financial instructions, and online exchanges can and will be tracked," Mr Dixon said.

"Now, with many virtual currency transactions considered a taxable event, it’s the tax professional's responsibility to calculate the gains and losses, track cost basis, and ensure tax returns are accurate, which can be especially complex if clients use multiple exchanges or purchased NFTs [non-fungible tokens]."


Advertisement

Looking to take control of your retirement? This table below features SMSF loans with some of the most competitive interest rates on the market.

Lender

Variable
More details
SELF MANAGED SUPER FUND LOAN
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
SELF MANAGED SUPER FUND LOAN

SMSF 80

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

Ocean SMSF (No Offset) (Metro) (Principal and Interest) (LVR < 60%)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

SMSF 70 (Refinance)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

SMSF Loan (Interest Only) (LVR < 60%)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

Liberty SuperCredit SMSF (LVR < 60%)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

SMSF Residential

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

SMSF 70 (Purchase) (New Customer)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 26, 2022. View disclaimer.


Photo by Vlad Sargu on Unsplash

Latest Articles

author-avatar
Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree
to the Savings Privacy Policy