SMSF Compliance & Contribution Rules

Each year an SMSF must keep proper accounting records, prepare financial statements, have an independent audit completed by an ASIC-registered SMSF auditor, lodge the SMSF annual return, value assets at market value, maintain a current investment strategy, and stay within the contribution, in-house asset and related-party rules. Trustees are personally responsible for meeting these obligations under the SIS Act and tax law, and the responsibility cannot be delegated away. We coordinate the accounting, audit and lodgement so the obligations are met on time, but the trustee duties remain the trustees.

The sole-purpose test is the foundational rule that an SMSF must be maintained solely to provide retirement benefits to members, or death benefits to their dependants. It is the test most other compliance rules sit underneath. An investment or arrangement that provides a present-day benefit to a member or a related party — using a fund asset personally, or renting a residential fund property to family — breaches the sole-purpose test and can put the fund's complying status, and its concessional tax treatment, at risk. Every decision the trustees make has to be able to satisfy this test.

Contributions into super are grouped into concessional contributions (broadly, before-tax amounts such as employer and salary-sacrifice contributions and personal deductible contributions) and non-concessional contributions (broadly, after-tax amounts). Each has an annual cap, and the caps are indexed over time, so the exact dollar limits depend on the relevant financial year. There are also rules that can allow carry-forward of unused concessional cap or bringing forward future non-concessional cap in some circumstances. Exceeding a cap can create additional tax. Because the figures and eligibility rules change, we confirm the current caps and your available room for the relevant year rather than relying on a fixed number.

Preservation rules govern when benefits can actually be paid out of super. In general, benefits are preserved until a member meets a condition of release — most commonly reaching preservation age and retiring, or reaching age 65. Accessing super before a valid condition of release is met is a serious breach with significant tax and penalty consequences, and illegal early access schemes are an area the regulator watches closely. The specific conditions and ages depend on the member's circumstances and the relevant rules, which we check before any benefit payment or pension is commenced.

Broadly, an SMSF is restricted in how much it can invest in, lend to, or lease to related parties of the fund. The general limit is that in-house assets must not exceed five per cent of the fund's total assets, measured at market value. There are some exceptions, such as business real property leased to a related party at arm's length. Breaching the in-house asset limit requires a written plan to rectify it. We monitor the in-house asset position as part of the annual compliance work so it does not drift over the limit unnoticed.

Consequences depend on the nature and seriousness of the breach. The independent auditor is required to report certain contraventions to the ATO through an auditor contravention report. The ATO has a range of responses, from education direction and rectification directions to administrative penalties imposed on trustees, and in serious cases making the fund non-complying — which has major tax consequences. Many breaches are coordination or timing issues rather than deliberate, and are best avoided by keeping the compliance disciplines current throughout the year rather than addressed at audit time.

No. Eternity Group Accountants provides SMSF accounting, tax and compliance services as a registered tax agent. Decisions about how much to contribute, what to invest in, and pension or retirement strategy involve personal financial product advice, which requires an Australian Financial Services Licence and is provided by a licensed financial adviser. We work alongside licensed advisers and refer where appropriate. What we do is keep the fund compliant, prepare the financials and return, and coordinate the independent audit — the strategy decisions remain the trustees, with licensed advice where it is needed.