End of financial year SMSF checklist

June 27, 2014

SMSF Borrowing


The end of the financial year is fast approaching. We now address some of the key items that should be considered in the lead up to 30 June 2014.

DBA Lawyers offers a range of kits that can assist SMSF trustees and advisers in meeting their end of financial year obligations. For more information click here.


Check the caps!

Exceeding the contribution caps can give rise to tax issues. This is probably still the case even after the recent budget announcement. Therefore, before any contributions are made, check them against the member’s relevant caps and any contributions previously made. This is especially important where the non-concessional contribution ‘bring forward rules’ are being utilised. For more information click here.

Contribution reserving

Contribution reserving strategies can be used to assist in managing a member’s contribution caps and might be worthwhile considering. ATO ID 2012/16 and TD 2013/22 provide support for such strategies. Note, however, that successful implementation of contribution reserving typically relies on the necessary documentation (eg, the reserving strategy) being in place before a contribution is made.

Contribution Reserving Kit
Contains a detailed memo outlining the practical ‘how to’, pros, cons and inherent risks of contribution reserving as well as template resolutions for those wishing to implement such a strategy. For more information click here.

Bring forward rules

Remember that the financial year in which a member turns 65 is the last opportunity they will have to access the non-concessional contribution bring forward rules.

In FY2015 the non-concessional contribution cap will increase from $150,000 to $180,000. This means that members will have the opportunity to contribute up to $540,000 from July onwards (instead of $450,000 as it currently stands). Keep this in mind, before making any non-concessional contributions in FY2014 as triggering the bring forward rules after 30 June might provide the opportunity to get more into super, quicker.

Pension minimums

Ensure minimums are paid

Advisers should ensure that the minimum pension payment has been paid in respect of each pension that a member is receiving. Ideally, an additional buffer amount should also be paid, to cater for any calculation errors, differences in asset values, etc.

The implications of not paying the minimum can be severe. For instance:

  • the fund’s ‘pension exemption’ for the entire financial year could be at risk;
  • it could result in the mixing of pension and accumulation interests in the fund; and
  • in the case of a transition to retirement income stream, any ‘pension’ withdrawals may constitute unauthorised lump sum payments.

ATO discretion

The ATO has the ability to allow a trustee to treat a pension as not having ceased, despite the minimum not being paid. However, this is only available in limited circumstances. Click here for more information.

Unpaid present entitlements (‘UPEs’)

Repay UPEs

SMSFs with UPEs owing from related unit trusts as at 30 June 2013 should ideally seek to have these amounts paid prior to 1 July 2014.

Broadly, the ATO may consider a UPE to constitute a loan by the SMSF to the unit trust if it is not paid within 9–10 months of the end of the relevant financial year.

The ATO, in SMSFR 2009/3, state that a UPE of this type could result in a contravention of the in-house asset rules, the arm’s length rules and the sole purpose test. This is disastrous for non-geared unit trusts as it will constitute a borrowing. Accordingly, SMSFs should ensure that any UPE from a related trust is paid to them in a timely manner.

Unit Trust Compliance Kit
This kit provides template documentation to issue partially paid units along with many other helpful templates for popular unit trust transactions. For more information click here.

Investment strategy

Review the investment strategy and don’t forget to consider insurance

Each fund’s investment strategy should be reviewed at least annually and revised as necessary.

When formulating or revising the fund’s investment strategy, SMSF trustees are now required to consider whether they should hold a contract of insurance for fund members. Advisers should ensure SMSF trustees are aware of, and comply with, this requirement (eg, by annually executing a resolution).

Investment Strategy Kit
Contains guidance and template documentation with a practical, comprehensive explanation of how to draft investment strategies for SMSFs. For more information click here.


Ensure reserves are appropriately managed

If there are any reserves, each fund’s reserving strategy should be reviewed and revised as needed. Will reserves augment earnings to boost member accounts or will some earnings be allocated to reserves instead?

Remember that an allocation from reserves will generally constitute a concessional contribution unless:

  • the amount is allocated in a fair and reasonable manner; and
  • the amount allocated is less than 5% of the value of the member’s interest in the fund at the time of the allocation.

Investment Reserving Kit
Contains guidance and template documentation on how to establish, maintain and apply reserves in an SMSF, as well as explaining the benefits of reserves and where their use would be very valuable. For more information click here.

Other items

Also consider in the lead up to 30 June 2014:

  • The ATO will soon have the ability to issue administrative penalties for minor breaches of super law. Therefore, any outstanding compliance issues should be rectified prior to 1 July 2014.
  • Where an SMSF has assets leased to a related party, ensure that all rents and other amounts have been paid on time. Is there any evidence to support these being at arms-length? Do the terms reflect current commercial practices?
  • Consider whether any expense or other payment needs to be made prior to 1 July 2014 including any tax payment, operating cost or insurance premium.
  • The level of the fund’s in-house assets must be calculated at 30 June 2014. Appropriate action should be taken before the end of the following financial year, if the fund’s in-house assets exceed the 5% threshold.

Trustee Compliance Kit
Contains guidance and template documentation on how to record trustee resolutions. The kit is very handy for advisers whom wish to draft resolutions on behalf of their SMSF clients. For more information click here.

This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.


If you wish to discuss SMSF and the end of financial year our advisors are at hand to deal with any questions you may have.
Call (02) 4926 2300 or email us.

Article by Bryce Figot of DBA Lawyers.

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