It’s interesting, with a percentage of Funds, certain complications occur and reoccur. I would have expected by now people would be aware of these issues.
- Beneficiaries Living Overseas
The rules are clear, if beneficiaries of a fund are residing overseas, then they need to have appointed an Australian resident with a Power of Attorney to to act for them. There is sometimes a resistance to appointing a Power of Attorney, maybe due a fear of losing control?
In some cases I find non-resident beneficiaries resist appointing a Power of Attorney as they don’t want to incur the cost. This in a fund with millions invested, they would rather run the risk of breaching the SIS Act requirements.
Drafting a Power of Attorney is legal work, so a solicitor needs to do it, but it is not a big job. If it is not completed prior to the SMSF being handed up for audit, then this just delays the audit and increases the costs.
- Pension Paid or Not?
To maintain the tax exempt status of a pension, it is necessary to note the agreed amount of pension must be actually paid. It cannot be accrued. I find it surprising some people don’t pay the minimum amount of pension.
If the minimum pension is not paid, then the minimum pension standards will not have been met and ATO may treat the member’s account as being in accumulation phase. This means the earnings on the account will be taxable. Has this been adequately explained to the trustees of the fund?
Also, the Trust Deed must allow for the payment of a pension. In some cases a pension has been created, but a review of the trust deed shows there is no provision for the pension or that pension type. This may not be checked until a thorough audit has been completed.
- DOB and Tax File Numbers
It is a minor matter, but the Members Statement must note the DOB and Tax File Number of the member. Again, if it is up to the auditor to pick up this, then it is just another item delaying the smooth progress of the audit.
© David Saul – Saul SMSF
David was among the first professionals to be accredited through SPAA as an SMSF Specialist Advisor™. He is also a Chartered Accountant and holds a Bachelor of Financial Administration from the University of New England, Armidale NSW.
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