If you are getting your SMSF audited there is no cause for concern. The ATO audit SMSFs for a variety of reasons. One main reason is the Australian government wants to make sure you understand your obligations in running your SMSF. The second main reason is that the government wants to make sure you are not getting ripped off. Even though getting audited might be a bit of a pain, it will probably help you with your understanding in the long run.
Are you getting your SMSF audited?
There are 2 sides to the audit process.
1. Making sure your documentation is in order by sending in copies of relevant documents online or via the post.
2. A 20 minute interview which covers various aspects to running your SMSF. Below is a list of questions which you should know how to answer as to how they relate to you in your situation.
SMSF Audit Breakdown
These questions will assist you if you are asked to complete a SMSF audit.
1. What is your relationship with the other trustees?
Let the auditor know how long you have known the other trustees, are they related, etc.
2. What made you decide to set up a self managed super fund?
What ever your reasons were. Most of the time it relates to…
Cost. Costs are fixed and shared among members.
Control. I can control the assets.
Choice. I can choose what to invest in.
3. Did you receive advice from anyone in relation to setting up a super fund?
No or yes if you did.
(Remember, New Brighton Capital is not a financial advisor, does not and did not offer financial advice)
4. Who set up the fund?
Online through newbrightoncapital.com, self serve platform.
5. What is the sole purpose of the fund?
The SMSF is to be run for the benefit of the members in their retirement.
(The auditor wants to know that you know that you cannot use the money in your super for personal use, like going on a holiday or catching up on day to day expenses.)
6. Did anyone offer you further advice?
No or yes if you did receive further advise.
(Again, New Brighton Capital is not a financial advisor and does not offer financial advice)
7. How much were you charged to set up the SMSF?
$1600 to establish a Corporate Trustee SMSF. Fee Includes SMSF establishment and lodgement of TFN and ABN application.
You can send through a copy of the invoice.
8. Have you signed any further documents?
You are required to sign…
– the trust deed
– minutes of the first meeting (if you are the nominated chairperson)
– trustee declaration form (download here)
– nomination of beneficiaries upon death,
– tax file number notification
– company formation docs if you set up as a corporate trustee
(all these forms are in the “Establishment Documents” section of your SMSF portal)
9. Bank account status and what is the name of the bank account that has been opened?
If you have set up your SMSF bank account, the name should be “The trustees names” as trustees for the “Your Super Fund”.
The account should be a business account and all trustees should be signatories.
If the banks say they cannot open an SMSF account for you until your fund is approved by the ATO, show them the second last paragraph on this page: https://superfundlookup.gov.au/FAQ/SelfManagedSuperFund which states “For newly established funds, the ‘Regulation details withheld’ status may be a temporary status and should not prevent the SMSF trustee from opening a bank account.”
If the bank manager will still not open an account for you, message us through your NBC portal and we will provide further instructions.
10. What do you understand a trust deed to be and what is its importance to the fund?
The deed …
– outlines the rules of the fund
– its importance is that it separates the entity from the members and the trustees.
– the fund is to be run to the benefit of the members in retirement.
11. Does it set out anything particular in the trust deed?
The trust deed outlines…
– what the fund can invest in.
– how it operates,
– the primary purpose of the fund
– how the funds will be invested
– how the members benefit,
– who may be trustees,
– how to appoint trustees,
– meetings, procedures, powers of the trustee,
– how trustees are not to receive a reward etc.
12. How much will you be rolling into the fund?
“Rolling” means moving. Just let the auditor know what percentage of funds you are moving into your SMSF.
13. Is there something in particular you want to use the money for?
The money will be only be used to invest in a way that is aimed to benefit the members in retirement.
(Again, the auditor wants to know that you know that you cannot use the money in your super for personal use, like going on a holiday or catching up on day to day expenses.)
14. Will you need the funds after the money is used?
No. We do not need the money at all. All the money is to be invested to benefit the members in retirement.
(Yep. They will ask again. And you know what they want to hear…)
15. Did anyone advise you about the investment in technology / bitcoin / robotics?
No, or yes if you did.
If you did not receive advice, you need to communicate that you have a good idea of what you are doing and are capable of not “putting all your eggs in one basket.” (Again, New Brighton Capital is not a financial advisor and does not offer financial advice)
16. Who are the members of the fund?
Name the members.
(the members are the people whose money is being invested for retirement)
17. Who are the trustees of the fund?
The trustee is the company that has been set up and the members are the directors of the trustee company:
The trustees are the ones who manage the investments held in the SMSF. In your case a company is set up to manage the investments so the trustee is the company. You (the members) are the directors/decision makers of the company.
18. Will you be using the services of a tax agent for the fund?
Yes. You MUST use an accredited SMSF accountant to complete your yearly obligations. New Brighton Capital has a list of prospective accountants all with SMSF accreditation.
You need to be aware that you need to…
– run the fund in compliance with the trust deed and the superannuation rules;
– complete tax return each year;
– complete SMSF audit each year.
19. What are your duties and responsibilities as a trustee of a SMSF?
1. To run the fund to the benefit of the members in retirement;
2. To run the fund in compliance with the super laws and rules outlined in the trust deed;
3. Only invest in what you are allowed to.
Investments in an SMSF must be made and kept on an arm’s length basis. Investments must be maintained on a strict commercial basis and always reflect true market value. This means you can’t for example buy an investment property and let your kids live in it for 1/2 the market rent.
4. Ensure proper tax returns, compliance and audit are lodged each year.
5. Trustees must be up to date with their ATO obligations.
20. What are the costs involved with running a SMSF?
1. SMSF supervisory levy is paid at tax time and is $526 first year, $263 every year after.
2. Cost for preparation and lodgement of tax return, audit, financial statements and compliance.
(New Brighton Capital performs these activities for $150 per month / $1800 per financial year)
Note: trustees are not allowed to receive any wage or payment.
21. How much do you expect to pay each year to run the fund?
The average cost to run a SMSF can range anywhere between 2-4k
New Brighton Capital can perform all required lodgements for $150 per month ($1800 per year). This includes the tax return, audit, ongoing compliance and financial statements. It does not include the SMSF government supervisory levy.
22. What insurances are being paid by the fund?
You do not have to have the SMSF pay for insurances. The following insurances can be purchased from your SMSF and the premiums are tax deductible for the fund.
Total and permanent disability insurance (TPD)
Income protection insurance
23. Where will the money come from to pay to run the fund?
You need to make sure you have the money to pay to run the fund. This can come from cash held, voluntary contributions or liquidating positions within the fund.
24. When is a fund member allowed to access their super?
You can only access your superannuation if you …
1. have reached preservation age. Preservation age based on you date of birth.
Your preservation age can be seen here: https://www.ato.gov.au/Individuals/Super/Accessing-your-super/ ;
2. are terminally ill or;
3. are experiencing Financial hardship.
25. What are some of the consequences of not complying with the rules related to running a SMSF?
You can go to jail for up to 5 years.
For breaches of super rules you can be fines up to $12,500 for each trustee.
26. Any instruments varying your trust deed?
If you have not changed anything in the trust deed then it has not been “varied”.
27. Is the SMSF acquiring any assets outside shares.
Yes or No. As long as the assets you are looking to purchase are permitted according to the super rules and your trust deed, then you are fine.
28. Are there any other rollovers from other SMSFs?
Are you moving funds from another SMSF to a new one?
You can have multiple SMSF’s.
29. How do you secure your private keys?
The ATO does have a requirement for how crypto private keys are stored. The requirement is that if the crypto is not kept on an exchange, then the private keys must be kept under lock and key like in a safe or locked filing cabinet. Multi-signature addresses all under lock and key in multiple locations would be ideal.
30. Are you going to borrow money or leverage trade with your superannuation?
Unless you know what you are doing here just say no. You cannot negative gear an investment in your super like you can in your personal name. You can only borrow to invest with your super if the investment is cash flow positive, like an investment property where the rent pays you more than the costs and loan charges. In this case the mortgaged property must be held in a seperate trust so that if you default the bank cannot come after other assets in your super. You can get more information regarding this here: https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Restrictions-on-investments/Borrowing/
31. When must you lodge your SMSF tax return?
If you lodge your SMSF annual return yourself, the due date is generally 28 February following the financial year. If you did not lodge your return for the previous financial year on time, the due date will be 31 October. For your first year the due date is 31 October.
32. Has another person told you that you can access your super for personal purposes?
You can only access super for personal use if you are…
– at preservation age; (check your preservation age here: https://www.ato.gov.au/Individuals/Super/Accessing-your-super/)
– terminally ill, or;
– experiencing financial hardship.
– a first home buyer. The First home super saver (FHSS) scheme was introduced by the Australian Government in the Federal Budget 2017–18 For more information regarding this check out the government website: https://www.ato.gov.au/Individuals/Super/Super-housing-measures/First-Home-Super-Saver-Scheme/
33. Where can you keep updated on your SMSF obligations?
1. The ATO website at: https://www.ato.gov.au/Super/Self-managed-super-funds/
2. You can subscribe to the ATO SMSF newsletter at: https://www.ato.gov.au/Super/Self-managed-super-funds/In-detail/News/Subscribe-to-SMSF-News/
3. Your SMSF accountant should also keep you abreast of any changes you need to be aware of.
34. What is the address of the SMSF?
There are 2 address for an SMSF, the principal place of business and the registered address. Both addresses are the home address of the first member.
35. Is there anything you want to ask or discuss?
Feel free to ask the auditor any questions you have as they are there to help you.