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What are the five major mistakes that a taxpayer should keep in mind to avoid while lodging the SMSF annual return? - KPG Taxation

According to the ATO, when it comes to preparing and lodging Self-Managed Super Fund (SMSF) annual return (SAR), the following are the top five mistakes identified which a taxpayer must keep in mind to avoid.

1.The bank account is not included in the name of the taxpayer’s fund.

A taxpayer is required a bank account in the name of the taxpayer’s fund to manage the SMSF operations and to accept the contributions, rollovers of super and income from investments. A taxpayer is required to mention the bank account when lodging a taxpayer’s SAR. The account must be separate from a taxpayer’s trustees’ s individual bank accounts and any related employer’s or adviser’s bank accounts. This will protect a taxpayer’s fund’s assets and ensure super payments can be made to the taxpayer’s SMSF.

2.Providing an incorrect electronic service address (ESA)

An ESA allows a taxpayer’s SMSF to receive electronic remittance advice and contributions if a taxpayer has members who are receiving super from non-related employers. An ESA consists of alphanumeric characters with a combination of upper and lower-case characters and it is case sensitive. It is not an email address or the contact details of the SMSF messaging provider.

3.Not valuing SMSF assets at market value

SMSF assets are required to be reported at market value on 30 June to prepare taxpayer’s fund’s accounts, statements, and SAR. If a taxpayer follows ATO’s valuation guidelines. ATO generally accepts the valuation that a taxpayer provides.

Accurate asset valuation is important to ensure that a taxpayer’s SMSF retains its complying fund status. Penalties may apply for inaccurate valuations as these can have an impact on a taxpayer’s member’s balances.

4.Trying to lodge with zero assets

An SMSF is not legally established until the fund has assets that are set aside for the benefit of its members. ATO won’t accept SAR from an SMSF that has no assets unless the fund is being wound up.

If it is the taxpayer’s SMSF’s first year and a taxpayer have no assets set aside for the benefit of a taxpayer’s members; a taxpayer can ask the ATO to either cancel a taxpayer’s fund’s registration or flag the SMSF’s record as a return not necessary (RNN).

5.Incorrect or no auditor’s details in SAR

A taxpayer’s SMSF must have its financial statements and records audited each year by an approved SMSF auditor prior to lodging the SAR. The approved SMSF auditor must be appointed no less than 45 days before a taxpayer’s SAR is due.

A taxpayer must ensure that:

  • a copy of the audit report is received before the lodgement of SAR.
  • report correct auditor details on the SAR including the SMSF auditor name, phone number, and date the audit was completed.
  • If a taxpayer lodge SAR without approved SMSF auditor details, it will be suspended and not recognized as a lodgement. This will impact the complying status of the fund until the SAR is lodged with the required information.

If the auditor’s details are incorrect, a taxpayer may also be penalized for making a false and misleading statement.