Valuing fund assets for an SMSF's annual return
One of many responsibilities trustees have when managing an SMSF is valuing the fund's assets at market value.
This must be done every income year, so the ATO knows the SMSF has complied with super laws.
The market value of an asset is the amount someone could be reasonably expected to pay if the asset was for sale.
Each year, the asset valuations will be reviewed by the fund's approved SMSF auditor as part of the annual audit prior to lodgment of the SMSF's annual return ('SAR'). The auditor will check that assets have been valued correctly, and assess and document whether the basis for the valuation is appropriate given the nature of the asset.
Trustees are reminded to get their valuations done before they go to the auditor, as this will streamline the process and avoid delays. It is also the trustees' responsibility to provide objective and supportable evidence to the auditor for the valuation of the fund's assets, including all relevant documents requested by the auditor.
Failure to do so could result in a delay in auditing the fund and potential late lodgment of the fund's annual return (and could also result in a contravention if the auditor believes mistakes have been made).
The ATO says trustees should "start researching now" to find who can value the fund's assets and what type of evidence is needed to support the valuation, as this can take time. In some instances, the law requires valuations to be undertaken by a qualified, independent valuer.
Checking that holiday employees get the right super
The ATO is reminding employers that the holiday season is fast approaching, and that their holiday casuals may now be eligible for super.
From 1 July 2022, employers need to pay super for employees at a rate of 10.5%, regardless of how much they are paid, because the $450-per-month threshold for super guarantee ('SG') eligibility has been removed.
This change doesn’t affect other eligibility requirements for SG. In particular, workers who are under 18 still need to work more than 30 hours in a week to be eligible.
For example, Anish is a 17-year-old employee working a job at a hotel over the holiday season. Anish works 32 hours in a week at the hotel and earns $800 before tax. He also works 5 hours at his local café, earning $150.
As Anish worked more than 30 hours in one week at the hotel, his employer will need to pay him super on the $800 earned. However, as Anish works less than 30 hours a week at the café and is under 18, he is not entitled to super from this employer.
The ATO recommends that employers check their payroll and accounting systems are up to date so they are correctly calculating their employees' SG payments, and that registered tax agents and BAS agents can help with their tax and other obligations.
ATO warning to SMSFs: "Paying the price for non-compliance"
There are various courses of action available to the ATO when trustees of self-managed super funds ('SMSFs') have not complied with the super laws, including applying administrative penalties.
A number of factors determine the amount of the administrative penalty, including:
the type of contravention;
when it occurred; and
the number of penalty units that apply.
For example, if an SMSF contravenes a provision in relation to borrowings during the 2021/22 financial year, the ATO may apply a penalty of 60 penalty units and, at $222 per unit for that year, this would result in the SMSF trustee having to pay $13,320. This could be even more if there are multiple contraventions.
The ATO imposed total administrative penalties of around $3.4 million on SMSF trustees last year for contraventions such as trustees illegally accessing super benefits, loans, or financial assistance given to members.
Also, just because a trustee receives an administrative penalty doesn’t mean the ATO won't undertake any other compliance action, such as issuing a notice of non-compliance or disqualifying the relevant entity as a trustee.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.