Top 10 self-managed superannuation fund compliance mistakes

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Are you a a member or trustee of a SMSF?

The Tax Office has compiled a list of the top 10 mistakes self-managed superannuation fund (SMSF) trustees make. The list of compliance mistakes compiled by the Tax Office was first introduced in 2005, when contravention reporting began. Since 2005, the Tax Office has been consistently updating the list to reflect the relevant legislation SMSF trustees contravene.

The top 10 compliance mistakes made by SMSF trustees are as follows:

Contravention Type

Incidence %

Proportion of assets %
Loan to members/financial assistance

20.9%

14.4%
In-house assets

18.3%

27.2%
Administrative-type contraventions

12.0%

1.8%
Separation of assets

12.9%

26.2%
Operating standard-type contraventions

8.3%

6.5%
Borrowings

8.0%

7.8%
Sole purpose

7.8%

5.7%
Investments at arm’s length

7.5%

7.4%
Other

2.8%

0.7%
Acquisition of assets from related parties

1.5%

2.3%

If an administrative penalty is issued to a SMSF, the trustee or the director of the trustee company becomes personally liable, and cannot be paid or reimbursed by the SMSF. Some of the administrative penalties that may be applied to a contravention of the legislation include:

Section & rule

Administrative penalty
S65 – prohibition on lending or providing financial assistance to members & their relatives

$10,200
S67 – prohibition on superannuation fund borrowing, except as permitted, e.g. limited recourse borrowing arrangement

$10,200
S84 – contravention of in-house asset rules

$10,200
S104A – failing to sign trustee declaration within 21 days of appointment and keeping for at least 10 years

$1,700

You should ensure all transactions made in a SMSF comply with the trust deed and superannuation rules. Contact us if you require any clarification or advice.

Remember: failure to comply with superannuation legislation can result in severe penalties.
This article was published on 18/10/2013 and is current as at that date

This article is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this article. All information is subject to change without notice. We and each party providing material displayed in this article disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of the information or material in this article. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

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