Many of you may just be getting back into your regular routine, but one thing to take note of if you are a self-managed superannuation fund (SMSF) trustee is that the 2012-13 SMSF annual return deadline is fast approaching.

Lodgement dates

For the 2012-13 annual return, the deadline for SMSFs that are wise enough to use a tax agent is May 15, 2014. This is in contrast to those trustees of SMSFs who are self-preparers, where the relevant dates for the 2012-13 annual return are:

• October 31, 2013 – for new registrants that prepare their own annual return (note that this date has now passed), and
• February 28, 2014 – for SMSFs that are not new registrants.

Note that earlier lodgement dates may apply where the fund has previously failed to lodge on time or have more than one return overdue.

Purpose of SMSF annual return

All SMSFs need to lodge an SMSF annual return each year in order to:

• report income tax
• report super regulatory information
• report member contributions, and
• pay the supervisory levy (currently $321 – made up of the $191 SMSF supervisory levy for the 2012-13 financial year and 50% of the SMSF supervisory levy for the 2013-14 financial year i.e. 50% of $259 rounded up).

Appointing an SMSF auditor

While May 15 may seem a little way off, you cannot lodge your SMSF annual return until you have had your SMSF audited.  This is because you need information from the audit report to complete the regulatory information in the return.

Even though there may be no rush as such to complete the audit, bear in mind that if any compliance contraventions are identified, the auditor can alert you to those contraventions.  This will give you a chance for rectification before the audit is finalised and the annual return lodged. This way, you can avoid being penalised by the Tax Office, or worse still, have your SMSF deemed non-compliant and losing your tax concessions.

The first step is to appoint an SMSF auditor. What you need to do is:

• check the auditor you intend to appoint is registered with the Australian Securities and Investments Commission (ASIC). ASIC will issue approved SMSF auditors with an SMSF auditor number – otherwise known as SAN – which you will need to fill out your annual return. Even though you may have previously used the same auditor, double check that they are registered
• contact the auditor early to allow sufficient time to conduct the audit and for this office to have enough time to lodge the SMSF annual return on time on your behalf, and
• appoint your auditor no later than 45 days (this recently changed from 30 days as of July 1, 2013) before May 15.

Some of the criteria that must be satisfied by an auditor are that they:

• must be independent and show freedom from bias, personal interest and association
• must not be a trustee or member of the fund
• must not have prepared accounts and statements for the SMSF
• must not be a relative or close associate.

Before an SMSF auditor can start an audit however, you (or this office) must provide information about your accounts and transactions for the previous financial year as well as statements and forms.  Any additional information requested by your SMSF auditor must be provided within 14 days.

Below are examples of what you should have on hand in case your auditor wants to have a look:

• minutes of all meetings for a minimum of 10 years or since the establishment of the fund (if the fund is less than 10 years old) with details of all major decisions made including:
  • asset purchases
  • commencement of pensions
  • appointment of new members, and
  • review of investment strategy
• accounting records for a minimum of five years (or since the establishment of the fund if the fund is less than five years old)
• signed trustee declarations for trustees who became members of the fund after July 1, 2007
• proper accounting records such as statement of financial position and an operating statement
• copy of trust deed
• election or notice to be a regulated fund
• trustee representation letter which is a statement by the trustees that to the best of their knowledge, they have approved and taken responsibility for the correct presentation of the financial statements
• investment strategy that gives consideration to risk, return, liquidity and diversification
• financial report on the fund, and
• working papers including copies of all relevant documents that are important in providing evidence that support your findings and opinion.

Once they have all the relevant documentation, some of the compliance issues that your auditor will keep an eye out for are:

• was the fund maintained for the “sole purpose” of providing benefits to either members on retirement or dependants (in the case of a member’s death)?
• does the fund meet the definition of an “SMSF” and has it chosen to be a regulated fund?
• does the trust deed and character of investments reflect this?
• does the fund have an investment strategy that complies with investment restrictions?
• did the fund give financial assistance to a fund member or relative?
• are the fund’s SMSF assets separate from those held by trustees personally?
• do trustees adhere to contribution and benefit payment standards?
• were any assets sold, and was this at market value?
• do trustees carry out administrative obligations?

More broadly, your auditor is required to:

• examine your fund’s financial statements
• assess your fund’s overall compliance with the super law
• provide you with an audit report by the day before you are required to lodge your SMSF annual return, and
• provide you with their SAN as it will be required to be disclosed on the 2013 SMSF annual return and in subsequent returns if appropriate.

After the process is finalised, be sure that your auditor provides you with the following documents:

• a letter of audit engagement – confirms the appointment of the auditor by you and the scope of the audit to be conducted
• audit working papers – documents that record the planning, nature, timing and extent of the procedures of the audit process
• a management letter or audit finalisation report – provides a summary of the audit findings
• a copy of the final, signed financial report of the fund and relevant accounting records that support the statements for the income year under review, and
• a copy of the audit report on the approved form – this includes the auditor’s opinion and qualifying remarks if any (you should keep copies of this for at least seven years).

Note that an audit is required even if no contributions or payments are made in the income year. It is worth noting however that when it comes to an annual return, the Tax Office’s system will not accept one if at the end of the financial year the SMSF has no assets or no members; unless that is the year the fund is wound up.

Failure to lodge

Failure to lodge your SMSF annual return by the due date can result in penalties and the loss of tax concessions for your SMSF. Be sure to consult this office for help on how to appoint an approved auditor and lodge your annual return in time.