• Registrations, lodgment and wind-ups – March 2015

    This webinar discussed:

    • registration of a new SMSF
    • lodgment obligations of an SMSF
    • winding up an SMSF.
     

    See also:

    Your questions answered

    The following questions were asked during the registrations, lodgments and wind-ups webinar.

    The questions have been separated into the following categories:

    Establishment and registration of an SMSF

    When registering an SMSF, how is there a value of assets when in fact there is no asset at the point where you apply for an ABN (as the fund's bank account has not even been established)?

    You need to advise the actual value of assets held by the fund at the time you are registering the SMSF. The fund can accept a nominal amount of $10 which you can keep with the trust deed until you get your ABN. This is the value of assets held at the time you register the fund.

    Once you get your ABN you can open up your bank account and deposit the $10. The $10 must also be allocated to a member.

    If an SMSF has a sole purpose Trustee Company, is there any requirement for the Trustee Company to have an ABN?

    No. The fund will normally have the ABN; this is what will display on Super Fund Lookup (SFLU) and the fund’s ABN is used for the member verification service (MVS).

    Refer to abr.gov.au, quick code (QC) 332, for more information on registering an SMSF.

    Why is the nominal amount of $10, held with an SMSF’s trust deed when registering the fund, an asset of the SMSF?

    The requirement to hold some form of assets on trust comes from the fact that a superannuation fund is a trust structure, and operates subject to trust law. The reason a settlor (often the lawyer/advisor aiding in preparing the fund) gives a nominal amount like $10 at the fund’s inception is so that there are initial assets to be held on trust.

    A trust cannot come into existence without certainty of subject matter: the trust needs to be declared over some definable assets. This principle is reflected in case law concerning the existence of superannuation funds. Hill J in Walstern Pty Ltd v Commissioner of Taxation expressed the view that a fund would not exist until there was actual assets held.

    The nominal amount used to settle an SMSF will be an asset of the fund even though it is not in an account, since it is money held on trust by the SMSF trustee.

    Holding assets to register a new SMSF when members can't contribute

    When registering an SMSF, we have been asked how a fund can hold a nominal amount with the fund's trust deed in the following circumstances:

    • if a new SMSF is 100% in pension mode when opened, and the members are 65+ and do not meet the work test requirements, or
    • if a member has exceeded either contributions cap

    A nominal amount of $10 can be held with the trust deed until the fund is registered. Once the ABN is issued, the $10 can be paid into the SMSF's bank account. The $10 will be regarded as a contribution to the SMSF.

    Under the legislation, if the only member(s) of the SMSF are over 65 and do not meet the work test, the $10 does not meet sub-regulation 7.04(1) of the Superannuation Industry (Supervisory) Regulations 1993 (SISR). Technically the fund should not accept the $10. However, in the situation where a fund has allocated a nominal amount to a member solely for the purpose to register an SMSF and a rollover was received by the SMSF in the same financial year, the ATO can apply an administrative discretion to allow this nominal contribution.

    This discretion would apply only on the proviso that the member receives the rollover into the SMSF before the end of the same income year the fund was established, and the nominal amount was paid to the SMSF.

    If a member has exceeded either contributions cap, technically, the fund should not accept the $10 for this member. However, the ATO can apply an administrative discretion to allow this nominal contribution and not pursue any potential ECT consequences if:

    • the fund has allocated a nominal amount to a member solely for the purpose to register an SMSF
    • a rollover was received by the SMSF in the same financial year, and
    • the nominal amount was then returned to the sender.

    This discretion would apply only on the proviso that the member receives the rollover into the SMSF before the end of the same income year the fund was established (and the nominal amount was paid to the SMSF).

    If the SMSF doesn’t receive the rollover in the financial year the fund was registered and the nominal amount was contributed to the SMSF, we would normally expect this amount to taken out of the SMSF to comply with SISR 7.04. The result would be that the SMSF no longer exists (no assets) and the fund's registration would need to be cancelled.

    Therefore, when registering an SMSF, we suggest that you not start this process in late May or June in order to allow sufficient time for the rollover and/or contribution refund to occur in the same financial year as the SMSF is registered.

    How can the SMSF hold assets without an ABN? That is not possible.

    You don't need an ABN to hold assets. You may encounter problems establishing a bank account for the SMSF, or making business transactions if you don't have an ABN but that does not prevent the SMSF from holding assets.

    The fund can accept a nominal amount of $10 which you can keep with the trust deed until you get your ABN. Once you get your ABN you can go and open up your bank account and deposit the $10. Note the $10 must be allocated to a member.

    See abr.gov.au, quick code (QC) 332

    Do older SMSFs need to have an ABN? Do they need to be registered for an ABN?

    The short answer is no, older funds don’t need to have an ABN.

    However, we encourage all SMSFs to register for an ABN; the ABN will simplify the administration of any fund changes, for example when adding new members, or changing the fund’s bank account.

    If the SMSF has an ABN, it will appear on Super Fund Lookup and the members’ details will appear on the member verification system; this will make any rollovers of super benefits for new members easier. And, as banks require an ABN when opening an account for an SMSF, the ABN will obviously speed up the process with the bank.

    For information on registering for an ABN, refer to abr.gov.au, quick code (QC) 332.

    A client is trying to settle on a property being purchased by the SMSF, but there has been a hold up with the rollover to the SMSF. Why is this delay happening?

    Our general advice is that money from an SMSF should not be committed to any purchases before it is actually in the fund.

    There are a number of steps we go through before the fund’s registration is finalised; and the SMSF appears on Super Fund Lookup, and the member appears on the member verification system.

    Most registrations proceed smoothly and are finalised quickly, but in some cases, we may review a fund and its members further. This can take more time and will affect the SMSF’s ability to receive rollovers.

    And there can be external delays with the rollover to the SMSF.

    So we suggest that you wait until you have received documentation from us advising the SMSF has been established, and the rollover has been received by the SMSF before entering into any purchase that is contingent on the rollover for payment.

    What criteria are used in the risk model for assessing SMSFs for possible illegal early release (IER) of superannuation?

    There is a range of criteria that we use when assessing an SMSF for possible IER. This includes a person’s tax compliance history and any past SMSF history. We look at the likelihood of the SMSF being established solely to access superannuation benefits. So, no one factor is used to determine if there is a risk of IER.

    For more information on IER, refer to ato.gov.au, quick code (QC) 18810

    An SMSF member has been told by his APRA fund that there has been a hold up with the rollover to his SMSF because of data problems with the member verification service. How is this problem resolved?

    The APRA fund must contact us (the ATO) about any mismatch in member details, and we will advise them what action can be taken to resolve the data mismatch issues with member verification system (MVS).

    If the SMSF member is contacted again, they need to advise their fund to contact the ATO, unless they are specifically advised that they have to take action, for example, to update their member details with the Australian Business Register.

    The member verification system (MVS) can only be accessed through the ATO Business Portal. Super funds need an AUSkey to log in and they can only have access to the MVS service if they are a regulated fund and they have been authorised by their member to rollover their benefits to the SMSF.

    For more information on MVS, refer to ato.gov.au quick code (QC) 23496

    Lodging an SMSF annual return

    What happens if I registered an SMSF in June, and the rollover does not come through until July? Do I have to lodge an annual return?

    The fund must lodge a return for the year it was registered as it holds assets, regardless of the amount of assets it holds, and even if it is a nil tax assessment and the rollover has not been received by the fund.

    Therefore, unless you are certain assets will be paid into the SMSF before the end of the financial year, you should to hold off establishing and registering the fund until the start of the next financial year.

    Irrespective of the amount of assets held by the fund or a nil tax assessment, an SMSF annual return must be lodged once it is registered.

    If a newly established SMSF holds no assets at the end of that same financial year, is an SMSF annual return required to be lodged for that year?

    For a newly registered SMSF that registered on or before 31 December 2014 and does not have assets set aside for the benefit of members in the first year it is registered, trustees or tax agents can ask us to either cancel the fund, or write and apply for a return not necessary (RNN).

    An RNN will only be given if certain criteria are met ie the fund did not receive assets in the year it was registered, the fund now holds assets and the fund will be lodging future returns.

    If there are still no assets in the fund at the end of the financial year, we recommend cancelling the fund and re-register the SMSF when there are assets set aside for the members.

    To register for an ABN on or after 1 January 2015 an SMSF must hold assets. SMSFs registered on or after 1 January 2015 will not be able to request an RNN.

    Refer to the following web page for more information: ato.gov.au quick code (QC) 23331.

    Do the lodgment obligations of SMSFs registered since 1 January 2015 also apply to those funds that may have registered the SMSF without holding any assets?

    If you have an older SMSF without any assets, you need to contribute or rollover money into the fund as soon as possible as we will be cancelling the registration of these funds with no assets that have not applied for an RNN. If you are going to request an RNN then, to qualify for an RNN, you need to now have assets in the fund and we will ask you to provide evidence such as a bank account that there are assets in the fund.

    If a tax agent can no longer lodge an SMSF annual return via ELS, how do they lodge now?

    Tax agents can lodge using the Standard Business Reporting (SBR).

    For information on Standard Business Reporting, refer to ato.gov.au quick code (QC) 43913.

    And for a comparison of SBR, BAS Agent Portal and ECI functions, refer to ato.gov.au quick code (QC) 42396.

    Will the ATO continue to apply a ‘return not necessary’ (RNN) for new SMSFs that are registered but do not have any assets?

    If you registered your fund on or before 31 December 2014, you may still apply for an RNN but you will have to provide evidence that the fund holds assets now.

    If there are still no assets in the fund, we recommend you cancel the fund and re-register once you have assets set aside for the members.

    To register for an ABN on or after 1 January 2015, an SMSF must hold assets. For SMSFs registered on or after 1 January 2015 RNNs will not be allowed.

    Refer to the web page at ato.gov.au, quick code (QC) 23331

    We have had a few questions about SMSFs set up a few years ago, but due to number of delays, the rollover has only been paid to the SMSF this year. We have been asked if you can still apply for RNNs for the first two years, as there was no money in the fund until this year.

    In this situation, we would like you write to us requesting RNNs for the fund’s first years of operation, and to provide documentary evidence of all assets held by the fund.

    We’ll consider all requests and review the evidence provided, and then advise you whether lodgment is required for the first years of the fund’s operation.

    Why can’t we use the SMSF annual return to advise you of updated member details?

    Currently, changes to any fund details can be done:

    • online at abr.gov.au (you'll need an AUSkey)
    • through a registered agent
    • by phone: 13 10 20 (you must be the authorised contact for your SMSF), or tax agents can use FKC (Fast key code) 44
    • by lodging the paper form Change of details for superannuation entities (NAT 3036)

    Refer to the web page ato.gov.au quick code (QC) 23334.

    We understand that this is not always the most convenient way for you to let us know of changes, so we are investigating a range of other options that are easier for you to use.

    We will keep you informed as this review progresses.

    One of my funds received a letter from you advising it has been removed from Super Fund Lookup because of overdue lodgments. All returns have been lodged but the fund is still not on appearing on Super Fund Lookup. When will it be back on Super Fund Lookup?

    We run a monthly report to check if lodgments are up to date for SMSFs that have previously been removed from Super Fund Lookup. If lodgments are up to date, the fund will be reinstated.

    You may be aware that there were some system problems at the start of this year, and this caused delays in reinstating some funds on Super Fund Lookup. These problems have been fixed, and we are in the process of reinstating on Super Fund Lookup SMSFs that have lodged all overdue returns over the last few months.

    If one of your funds is not appearing on Super Fund Lookup, and you believe it should be, please contact 13 10 20, (tax agents can use FKC 44) and this will be looked into.

    An SMSF has received a letter from the ATO advising it has been removed from Super Fund Lookup because of overdue lodgments. All returns have been lodged but the fund is still not on appearing on Super Fund Lookup. When will it be back on Super Fund Lookup?

    We run a monthly report to check if lodgments are up to date for SMSFs that have previously been removed from Super Fund Lookup. If lodgments are up to date, the fund will be reinstated.

    You may be aware that there were some system problems at the start of this year, and this caused delays in reinstating some funds on Super Fund Lookup. These problems have been fixed, and we are in the process of reinstating on Super fund Lookup SMSFs that have lodged all overdue returns over the last few months.

    If one of your funds is not appearing on Super Fund Lookup, and you believe it should be, contact 13 10 20, (tax agents can use FKC 44) and this will be looked into.

    If an SMSF is registered with a nominal amount of $10, do the trustees need the fund to be audited by an approved SMSF auditor and lodge an SMSF annual return with $10 assets?

    If a fund is established and holds assets, it must lodge its first SMSF annual return. This includes having the fund audited by an approved SMSF auditor.

    Do you have any procedure where we can let you know about the audits which we have done?

    SMSF auditors can lodge an Audit Complete Advice (ACA) via the electronic superannuation audit tool (eSAT) where they have completed an audit and have nothing to report.

    However, this has to be completed for each fund; there is no facility to notify us in bulk of the audits an SMSF approved auditor has completed.

    If a corporate trustee has been deregistered, who signs the paperwork needed to restructure or wind up the fund?

    Ideally, the corporate trustee will be deregistered after the fund has been wound up or the trustee(s) changed. However, the superannuation legislation allows a six months period from when the SMSF ceased to meet the definition of an SMSF (such the corporate trustee being deregistered) to restructure as an SMSF, appoint an RSE licensee or wind up the fund.

    If the fund is being wound up, the former directors of the corporate trustee would sign the final return if they are managing the wind up. Otherwise, the new trustee(s) would be required to update the details of the new trustee. This can be done:

    • online at abr.gov.au (using an AUSkey)
    • through a registered agent
    • by phone: 13 10 20 (by an authorised contact)
    • by lodging the paper form Change of details for superannuation entities (NAT 3036).

    Refer to ato.gov.au, quick code (QC) 23334, for more information.

    Winding up an SMSF

    Do trustees still have to send an Intent to wind up form to the ATO before formally winding up the fund?

    Trustees are no longer required to notify the ATO of their intention to wind up an SMSF but they are still required to lodge a final return and include the date of wind up on the return.

    We will cancel the ABN as part of the process of winding up the fund; and we will advise you when the fund wind up has been finalised.

    See ato.gov.au, quick code (QC) 43348

    How do you lodge a final return on wind up part way through the year?

    If an SMSF winds up mid-year, and the SMSF annual return for that year is not available, you can lodge a final return using the previous financial year's return. You will only be able to lodge a paper return, and you will need to change the year on the paper return to the SMSF’s final year.

    How much money should be kept in an SMSF’s bank account for winding up the fund?

    We can’t provide a definitive answer as the amount will vary from fund to fund. However, we suggest that the bare minimum is kept to cover any fees, possible taxes and other fund wind up costs.

    Once the trustees have received a letter from us advising the SMSF has been wound up, the bank account can be closed. Any remaining money in the account can be either transferred or rolled over, or paid out (depending on the individual circumstances of the members).

    What is the ATO attitude to winding up an SMSF when there is a refund being received after the end of the following year? Does that mean a new audit of the fund is required?

    Once the fund is wound up, it cannot be reinstated.

    A further audit is not required, but the fund bank account should be maintained until the refund is credited to the SMSF’s bank account. Any remaining money in the account can be either transferred or rolled over, or paid out (depending on the individual circumstances of the members).

    See Auditing an SMSF at ato.gov.au, quick code (QC) 45565.

    What happens to any ATO refunds for an SMSF if there is no bank account for the fund once it is wound up?

    If the self-managed super fund's (SMSF's) bank account has been closed and the trustees have received a refund cheque (eg income tax refund), the SMSF will need to return the cheque along with a letter. The letter should include:

    • SMSF's name and TFN/ABN
    • date the SMSF was wound up
    • reason the bank account was not left open
    • proportion of the refund that should be allocated to each member
    • details of where each member's super has been paid, eg transferred to another super fund (include super fund’s ABN and member’s account number if known) or paid to member as a benefit (include date and type of benefit paid), and
    • signature of a trustee.

    The letter should be sent to:

    Australian Taxation Office

    PO Box 3578

    Albury NSW 2640

    Trustees will receive a response within 28 days. It is also recommended the SMSF keep a copy of the letter and cheque for their own records.

      Last modified: 21 Jul 2016QC 49080