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Now is a good time for an SMSF Christmas stocktake

Nov 25, 2022, 10:25 AM

By Philip La Greca
Executive Manager, SMSF Technical & Strategic Services


The Christmas break is approaching, and it marks the halfway point of the 2022-23 financial year. This is a great time to examine what your SMSF has done so far this year.

So where do you start?

The SMSF’s operating bank account is the first port of call because it should be where all cash transactions went through. Working through the bank statements or transaction history from 1 July 2021 until now we can put together the supporting material for each transaction that went through the bank account.

There is a limit to the types of transactions that can be made, and each transaction should be able to be matched to supporting documentation whether digital or scanned.

SMSF bank accounts allow only four types of deposits

1. Contributions – For these the supporting material will depend on who made the contributions. If it was made by an employer, then most likely the information will have been provided electronically via SuperStream unless the employer is related to the SMSF. For personal contributions there will need to be a notice from the individual advising the SMSF what type of contributions was made and if it is made of for another person e.g. spouse contribution.

2. Rollovers - The SMSF should have received a superannuation rollover statement if the rollover is not made in cash, otherwise the information will be provided electronically via SuperStream,

3. Investment income – The paperwork will vary depending on the source of this investment income. For share dividends you should have a dividend notice which will include franking credit details if applicable. Interest payments will come with a letter specifying the period of the interest relates or when the investment was initially made you would been given a schedule with amounts and dates of interest payments. For property it will depend on whether you have an real estate agent managing it for you. You may receive a net rental amount and your agent will provide you with a rental statement outlining the gross rental received as well as any at going expenses paid on your behalf, or

4. Proceeds from the disposal of an asset - In this case you should have a contract for sale it will specify the amount to be received on disposal as well as the purchaser’s details and timing of the payment.

Similarly, bank account withdrawals only come in four types

1. Expenses - Invoices should be provided for each expense outlining which service was provided to the SMSF, or there may be a service agreement which will outline regular expense charges such as ongoing administration or advice fees,

2. Lump sum benefit payments - As any benefit needs the member to instigate it, evidence of the member requesting the trustees make a payment should exist. This may simply be a letter from the member to the trustee but may also require statements and/or evidence confirming the member has satisfied the appropriate condition of release to let the SMSF make the payment,

3. Pension payments - For these payments the obligations are very similar to those for lump sums when commencing a new pension. For ongoing payments, the instructions from the member requesting a particular payment will be needed if there is not a periodic payment set up. This is since without periodic payments, the trustee has no basis under which to make an ad hoc payment without member instruction, or

4. Purchase of investments – As with sales, purchases will require a contract document outlining the asset being acquired, the vendor name, the date of acquisition and the purchase price.

What’s next?

The other key documents to check is the last set of financial statements containing the investment summary and member account details.
The investment summary will let the trustees identify all the existing assets encourage and confirm that Eva they're still assets of the fund as no contract for sale has been done for of these assets. Additionally, having examined the transactions it will assist the trustees in confirming whether any income is outstanding for the period from these assets. This can be done by simply ticking off each asset with the investment income transactions received in the funds bank account against the list of investments. If no income has been received to date, then the trustees should be able to confirm whether the income is outstanding, it is not yet due, or the asset is being held purely for growth.
Reviewing the member account summary will help the trustees identify the status of each member balance. It will also allow a check to ensure that any contributions or rollover received have been for existing members. If this is not the case, then either that contribution should be returned or a new member and potentially trustee needs to be added to the SMSF.
A similar check can also be done in respect of benefit payments not only will you be cross- referencing to ensure the member is in the appropriate phase, accumulation or pension phase, but also more importantly the likelihood that there is sufficient benefit in the member account to cover the benefit payment amount.
Finally, this gives an opportunity to review the amount of pension paid to date and compare it with the required minimum annual payment level. If the minimum has not been met it will provide the trustees with a reminder off the cash flow obligation that must be met in the next six months.
In summary doing this Christmas review and stocktake will enable the trustees of the SMSF to ensure that all information they will need to provide 2022-23 financials is in place. This will also help the trustees identify and manage any obligations they have for the rest of the year and ensure they can be met.

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