The final part of our SMSF year-end checklist is below, including a few things specific to this last financial year:
11. Don’t forget PAYG Withholding for benefit payments to members under age 60
Where a pension is paid to a member under age 60, the fund is required to abide by the PAYG Withholding requirements in relation to the taxable component. Any PAYG Withholding remitted to the ATO as part of the June 2016 Activity Statement will count as a payment in the 2015/16 income year and towards the 2015/16 minimum pension payment and, for a Transition to Retirement Pension, the 10% maximum pension allowed. The fund will also be required to issue the relevant PAYG Summary Statement to the member by the relevant due date.
Lump sum benefit payments to members under age 60 at the time of the payment, are also subject to the PAYG Withholding rules and whilst there is a $195,000 low rate cap for 2015/16, there is still the requirement for the fund to register as a PAYG Withholder and issue the relevant PAYG Summary Statement after 30 June.
12. Market valuation of assets
Although this is a simple process for assets that have a quoted market price, like listed stocks and managed funds, if your SMSF have assets that are not on-market, such as real estate and collectables, it’s a good idea to line up the relevant assessors, where needed, early. External valuations may not be required every year, however, the superannuation law requires the SMSF trustee(s) to determine market value for each year’s set of financial statements.
13. Review the fund for any amounts owing by members or related parties
Now is a good time to review your SMSF and address any contraventions that may have occurred during the year. SMSFs lending money or providing financial assistance to members and relatives, and breaches of the in-house asset rules, are common problem areas. Under the new SMSF Penalty Regime such contraventions can lead to penalties as high as $10,800 per trustee, so best to have them tidied up before year end.
Specific Year End issues for 2015/16
In addition to the previous (baker’s) dozen of year end considerations, here are a few more that are specific to the 2015/16 income year:
Pre 1 July 2011 Collectables & Personal Use Assets
Funds that hold pre 1 July 2011 Collectables & Personal Use assets must comply with the specific rules for these types of assets from 1 July 2016 or dispose of these assets by 30 June 2016.”
Non-commercial related party loans under an LRBA
Funds that have a related party loan as part of a Limited Recourse Borrowing Arrangement (LRBA) must review the terms of the loan for commerciality. The ATO published a Practical Compliance Guideline on how to ensure such loans are regarded as commercial so that the income from the LRBA is not treated as Non-Arm’s Length income (NALI). STOP PRESS! – ATO announces extension to 31 January 2017 for LRBA related party loan compliance.
It has been reported by SMSF Adviser online (30 May 2016) that the ATO has extended the 30 June 2016 deadline for SMSF trustees that have a related party loan under an LRBA to ensure that the related party loan is on commercial terms or complies with the safe harbour guidelines. The deadline has been extended to 31 January 2017.
This extended deadline means that the ATO will not select an SMSF for a review purely based on it having an LRBA for the 2014/15 or earlier year, provided the related party loan is on commercial terms or the LRBA is brought to an end, by 31 January 2017. It also requires the SMSF to make loan repayments of principal and interest for the year ended 30 June 2016, based on commercial terms, by 31 January 2017.
Licensing for Accountants advising in SMSFs
1 July is the start of the new licensing regime for accountants wanting to continue to advise on SMSFs, other than providing administration, compliance, audit and tax services. Joe is fully licenced with ASIC which allows him to give advice in regards to establishing and operating an SMSF as well as providing administration, compliance, audit and tax services.
Happy End of Financial Year!