The 2013/2014 financial year is a huge year for SMSF trustees with a hefty batch of changes that took effect from 1 July 2013, and some important changes taking effect from 1 July 2014. You also need to be aware that a raft of changes took effect from 1 July 2012 (2012/2013 year).
As a SMSF trustee, you will need to ensure that your super fund complies with the new rules, and that you have systems in place to monitor whether all, or some, of the new rules apply to your SMSF.
This article outlines the main changes to the SMSF rules including:
- SMSF changes taking effect from 1 July 2014, or from royal assent
- SMSF changes that took effect from 1 July 2013
- SMSF changes that took effect before July 2013
- Other related SMSF changes
SMSF changes taking effect from 1 July 2014, or royal assent
The following SMSF changes were intended to come into effect from 1 July 2013, but relevant legislation was not passed in the last sitting of Parliament before the election. The new Liberal government have confirmed that the following changes will now come into effect 1 July 2014:
- New administrative penalties. The ATO will have the power to impose a new list of administrative penalties.
- Power to force rectification. The ATO will have the power to force you to rectify specific contraventions.
- Mandatory trustee education. If you’re a naughty SMSF trustee in the eyes of the ATO, you can be forced to attend mandatory trustee education.
Criminal and civil sanctions for early access promoters. Taking effect from Royal Assent, the ATO can impose criminal and civil sanctions on promoters of illegal early access super schemes.
STOP PRESS: Taxation of illegal access of super money not going ahead. Amounts illegally accessed from a SMSF were to be taxed at the superannuation non-complying tax rate (45%).Originally intended to take effect 1 July 2013, but the new Liberal government is not proceeding with this measure.
SMSF changes that took effect from 1 July 2013
As a trustee of your self-managed super fund, you need to be aware of the following changes to the SMSF rules:
- SMSF supervisory levy. Another increase in the SMSF supervisory levy paid to ATO from the 2013/2013 year, taking the levy to $259. You can also expect to pay the levy earlier than in previous years. For more information see SuperGuide articles, ATO levy hike for SMSFs and Another SMSF whack! ATO levy jumps to $259).
- SMSF auditors must be registered. From 1 July 2013, SMSF trustees will need to confirm that the SMSF auditor appointed to audit the SMSF is registered with ASIC. SMSF trustees can confirm registration status by ensuring the auditor has a SMSF auditor number (SAN), and checking the ASIC register using ASIC’s online service ASIC Connect. The SAN will need to be included in SMSF annual returns from 1 July 2013. Note that SMSF auditors must be registered with ASIC by 30 June 2013, to be able to conduct SMSF audits from 1 July 2013. At the very least, any prospective SMSF auditors must have applied to ASIC by 30 June 2013, to be eligible for any transitional arrangements.
- Related party transactions. STOP PRESS: The ban on off-market share transfers is not going head. The proposed change was, that from 1 July 2013, purchases and disposals of assets between related parties of a SMSF must be conducted via an underlying market for that asset type. If an underlying market did not exist, then the transaction must be supported by an independent valuation. The new Liberal government has confirmed that off-market share transfers are here to stay for SMSFs. For background information on this rule see SuperGuide article SMSF alert: Off-market share transfers get green light.
SMSF changes, effective from 1 July 2012
You also need to be aware of important changes to SMSF rules that took effect from 1 July 2012 (2012/2013 year), which include the following requirements:
- Review investment strategy regularly. You must review your super fund’s investment strategy regularly to ensure that it still meets the needs and objectives of your fund members. According to the ATO, proof of a review may involve documenting any review decisions in the minutes of trustee meetings held during the year.
- Consider the merits of life insurance. You must consider the merits of life insurance for each SMSF member, although taking out life insurance is optional. .
- Value your SMSF assets at market value. You must value the SMSF’s assets at market value when preparing financial accounts and statements from the 2012/2013 year. The ATO has produced valuation guidelines for SMSF trustees and their advisers. Click on this link to access the guidelines.
- Keep personal assets from SMSF assets or get fined. You have always been required to keep your personal assets separate from your SMSF’s assets, but now this requirement is an operating standard. This change to the legal status of this requirement means that you can now be hit with a fine of up to $11,000 if you break this rule.
Other related changes to the SMSF rules include:
- Collectibles. From 1 July 2011, investment in new collectibles subject to stricter rules, in particular storage and insurance. Existing collectibles must comply with new rules by 1 July 2016. For more information see SuperGuide article SMSF investment: Stricter rules in place for artwork and other collectibles.
- Pension earnings remain tax-exempt on death of fund member. Pension earnings remain tax-free after the death of the pension recipient, even when there is no reversionary beneficiary. This announcement partly neutralises an ATO draft ruling released in July 2011 (see SuperGuide article, Confirmed! Pension earnings remain tax-free after death).