• SMSF professionals update – July 2016

    This webinar discussed:

    • changes to collectables and personal use assets
    • current areas of focus and compliance issues
    • 2016 lodgment update
    • auditor issues including independence and low cost audits
    • SuperStream.

    Watch:

     

    See also:

    Your questions answered

    The following questions were commonly asked during the July 2016 update webinar.

    What is an electronic service address?

    An electronic service address (ESA) is not the same as an email address. An ESA is an alias used by the SMSF that represents the uniform resource locator (URL) or internet protocol (IP) address of a messaging provider. An SMSF can obtain an ESA via an SMSF messaging provider.

    The electronic service address needs to be provided at label 7C of the SMSF annual return. The ESA should be reported here exactly as provided by the SMSF message service provider. You should check the ESA has been input correctly, that there are no spelling mistakes, spaces or transposed characters and an email address has not been incorrectly provided.

    Do I need to apply for an exemption if I don’t require an ESA?

    No, you do not need to apply for an exemption from meeting the SuperStream standard if you only receive related party employer contributions or only make personal contributions.

    What happens if an SMSF doesn’t provide the information to the tax agent to actually prepare the returns to lodge online?

    Non-lodgment is a critical issue for us as it impacts on the integrity of the super system. We will be continuing our focus on those who repeatedly fail to lodge as obligated under the regulations.

    As an SMSF professional, you should make your clients aware of the risk they take of incurring penalties. This includes the risk of being disqualified as a trustee, by not providing the information on time or by delaying lodgment.

    What constitutes a low cost audit?

    ‘Low cost audits’ generally refers to audits where the fee is in the lower range of audit fees charged for SMSF audits. We may have some concerns about whether low cost audits are meeting the required quality and standards where the audit is performed for a flat fee or a guaranteed fast turnaround time, regardless of the complexity of the audit.

    How do I report any concerns I have about low cost audits?

    You can report any concerns you have about low cost audits by sending an email to ATOSMSFauditorteam@ato.gov.au

    Will auditors be expected to visit private residences to see if collectables are being displayed correctly?

    The requirements for a collectable purchased on or after 1 July 2011 includes that it is not to be stored at a private residence. Existing collectable assets held by an SMSF at 1 July 2011 had until 30 June 2016 to comply with this rule.

    Auditors need to exercise their professional judgment in how they test compliance with regulatory obligations. Generally, trustees should be able to provide sufficient documentary evidence detailing where these items are being stored to satisfy the auditor's requirements. However, if an auditor has concerns about the trustee’s compliance in this area, they may exercise their judgment to expand their compliance testing and seek more information before reaching a conclusion on compliance with the obligation.

    Will the ATO be auditing every SMSF that has a related party borrowing to determine whether they have complied with the safe harbour guidelines?

    We will be looking to identify cases where we are concerned that SMSFs are not complying with the safe harbour guidelines arrangements are outside of the general guidelines of what we think looks appropriate.

    Where potential risks are identified we will undertake compliance action and review them as part of our broader SMSF compliance approach.

    What if the SMSF owns assets under a related party limited recourse borrowing arrangements that are not real property, listed shares or units. How do I apply the safe harbour guidelines to those assets?

    For assets not covered by the safe harbour guidelines it is up to the trustee to acquire evidence that would support what might comprise commercial terms on the borrowing. If this is not possible, then trustees should consider the risk attached to the borrowing using the current guidelines as a reference point.

    For example, if an SMSF has a borrowing over an unlisted share or unit, then given the higher risk associated with generating income from the asset and being able to meet loan repayments, you could reasonably expect the loan to include the following:

    • higher interest and principal rates
    • lower loan to value ratio
    • shorter loan repayment length.

    Can a collectable be insured under the same insurance policy that the insurance for the storage company is held in?

    Collectables and personal use assets purchased by the fund must be insured in the name of the fund within seven days of purchase.

    The fund’s collectables and personal use assets may be insured under separate policies or collectively under the one policy.

    Unless the insurance is in the name of the fund the insurance requirement will not be met.

      Last modified: 20 Sep 2016QC 49862