Ask the auditor: the top 5 questions SMSFs ask

Founder and CEO of Engage Super Audits
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As an SMSF auditor, I get asked a lot of questions, but these are the five most common:

1. Why do I need to keep records?

The rules applying to SMSFs require trustees to keep and maintain appropriate records for at least five years!

The best advice I can give is to communicate regularly with your advisor and auditor so that you know the types of records that they want you to keep (ask in advance!). This saves you from holding onto things that you don’t need or having to chase up records months or even years after transactions happen.

2. Can my SMSF buy this asset?

When you are looking at making any investment with your SMSF money, you need to first make sure your super fund trust deed allows the investment, and secondly that there are no rules within the legislation that would prohibit the investment.

Be extra careful if you are thinking of transferring or selling personal investments into your SMSF. For example, residential rental property can’t be transferred into your SMSF, so ask before you act.

And don’t forget to review and update your fund’s investment strategy any time you’ re making a new investment.

3. Can I have this insurance in my SMSF?

It makes sense to have life insurance policies paid from your SMSF as the premiums are deductible and can be paid out of your compulsory SG contributions. Many other insurance policies including TPD and income protection can also be paid from your SMSF.

It is very important that the owner of the insurance policy is the Trustees of your SMSF. Never pay personal insurance policies from your SMSF bank account as this will cause a breach of the rules. New policies in the name of the super fund are the safest way to go.

4. Why do I need an audit, can’t the ATO do that?

SMSFs by law are required to have an independent audit of their financial statements and compliance with superannuation law every year. The auditor needs to be an approved SMSF auditor, and from 1 July 2013, they will need to be registered with ASIC.

Who you appoint as auditor of your fund is your decision and it’s important to know who your auditor is and what their qualifications are. You should also be clear on what relationship the auditor has with your advisors to be confident it truly is an independent audit.

There are many benefits to having an annual audit and it is very different from the experience you may encounter with an Australian Taxation Office (ATO) audit. The fact is the ATO doesn’t have the resources to audit every fund, so they rely heavily on approved auditors to assist them in educating Trustees and focusing attention on only the worst cases.

Read: Why an audit can be the best thing for your SMSF.

5. I’ve contributed too much into my super fund, what do I do now?

It’s very important to get proper advice from an SMSF specialist if you think you have contributed too much. Excess contributions tax can be extremely costly, so it’s worth paying for advice.

There are situations where your contributions can be refunded – such as if you are over 65 and haven’t met the “work test”, or where you have made a single contribution that exceeds your non concessional contribution cap ($150,000 or $450,000, depending on your age).

Contributions received in June also provide some planning flexibility using a strategy that defers allocation of the contribution until July.

It’s very important to ensure all contributions have been appropriately classified (concessional or non-concessional) and appropriately allocated to the right person. Many excess contribution cases I see are simply caused by the wrong assumptions being made in the preparation of SMSF financial statements and no one has asked the right questions about what was actually intended.

Have you got a question for Jo? Click here to submit it.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should consider the appropriateness of the information in regards to their circumstances.

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