Month: January 2022

Common Mistakes Often Made By SMSF Trustees That You Can Avoid

Posted on by Adam_Admin

Involvement in an SMSF can put certain responsibilities in their trustees hands, and those who overlook important details or find themselves reported to the ATO for failing to fulfil those responsibilities may risk incurring financial, civil or criminal penalties.

As SMSFs often involve multiple members, the risk of non-compliance grows. You might be doing the right thing, but can you say the same thing about your fellow trustees?

That is why the role of the trustee should not be taken lightly as with greater control comes greater responsibility, should the administration of your SMSF go awry.

Make sure your retirement nest egg is protected by avoiding these common mistakes made by SMSF trustees.

Breaching The Sole Purpose Test

SMSFs must be maintained for the sole purpose of providing retirement benefits to your members (or for their dependents if a member dies before retirement). You will fail the test if a member gets any financial benefit through an investment, aside from increasing the return to your fund.

For example, a member’s personal use of a holiday house purchased by the fund, without making rental repayments, would breach the sole purpose test. The rules can become complex, which is why seeking professional advice may be wise. Trustees who breach the sole purpose test will lose their fund’s concessional tax treatment and could be liable for civil and criminal penalties.

Financial Assistance & Member Loans

Trustees can make the error of accessing their SMSF funds at will instead of following strict super laws. You cannot access your SMSF bank account to give financial assistance or loans to members or members’ relatives, improve your cash flow, repay debts or make personal investments. There have also been reports of withdrawals from SMSFs accidentally on mobile banking apps. Avoid ATO sanctions and keep your bank accounts separate to ensure no premature withdrawals are made from your SMSF account.

Failing To Lodge Paperwork On TIme

SMSF trustees must comply with demanding reporting and recordkeeping requirements. Your SMSF will have an annual audit. Failure to produce certain documents or make the deadline date will result in your SMSF being reported to the ATO. It is crucial to keep accurate records of all decisions and transactions should the ATO take an interest in your SMSF. A financial advisor may be helpful to take the stress out of keeping on top of your paperwork.

Not Planning For The Death Of Another Member

The death or illness of a member of your SMSF can have devastating effects on your retirement savings if you are not prepared. Dependency on one member to administer the SMSF can destabilise the fund if they pass away. Ensure that responsibilities are evenly distributed, if necessary, and that there is a clear understanding of the processes of the SMSF.

Go further than taking out life insurance policies and take the following precautions:

  • Educate all of the members on the basic rules and strategies of your SMSF
  • Employ an accessible financial advisor to answer any questions you may have about it, and to ensure that you remain compliant.
  • Allow access to passwords and account numbers for all members
  • Regularly review your binding death benefit nominations
  • Know the processes of your SMSF, and be aware of the responsibilities of the trustees.

Business Activity Statements – How To Take The Sting Out Of The Quarterly Payment

Posted on by Adam_Admin

Been hearing a lot about business activity statements, and feeling more than a little pressure?

Kicking off the new year for your business shouldn’t be shrouded in the darkness that can be a looming BAS. But how can you be certain that your business is prepared?

To start with, demystifying the BAS might alleviate some of that anxiety and pressure your business may have been facing. Essentially, a business activity statement (BAS) is a government form that all businesses must lodge to the Australian Tax Office (ATO). All businesses registered for GST need to lodge a business activity statement (BAS). This can be done with the assistance of a registered tax agent or BAS agent.

A BAS is a summary of all the business taxes you have paid or will pay to the government during a specific period of time. You may lodge your BAS monthly, quarterly or annually (depending on the size of your business you may not have the annual or quarterly option) or may do so through your tax/BAS agent.

When lodging your BAS, you need to include these payments within it:

  • Goods and services tax (GST)
  • Pay as you go (PAYG) income tax instalment
  • Pay as you go (PAYG) tax withheld
  • Fringe benefits tax (FBT) instalment
  • Luxury car tax (LCT)
  • Wine equalisation tax (WET)
  • Fuel tax credits

A BAS is issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO and payment made to the ATO by the due dates as follows:

  • For monthly BAS: within 21 days of the end of the month on the form
  • For quarterly BAS:
    • Quarter July – September: Due 28 October
    • Quarter October – December: Due 28 February
    • Quarter January – March: Due 28 April
    • Quarter April – June: Due 28 July

(as registered tax agents we are given an extension to most of these deadlines)

You may instead be eligible to submit an Instalment Activity Statement (IAS). In the IAS, the ATO tells you every quarter what your GST instalment amount is and where applicable your PAYG instalment amount is.  Essentially, the IAS is a form that is similar to the BAS, but simpler in that you do not have to be concerned about GST and some other nominated taxes.

Businesses that are not registered for GST and individuals who are required to pay PAYG instalments or PAYG withholding (such as self-funded retirees) use this form to pay PAYG.

IAS provides a little more flexibility in the arrangement as the instalments are advised by the ATO on what you need to pay to cover your liabilities.

You may be able to vary those amounts if you feel that the advised instalments are too much or not enough to cover your liabilities. You may also be able to pay the amount in one lump sum at the end of the year. Before changing the amount due, or the timing of the payment, it’s best to consult with us (or your registered BAS agent) for additional advice to suit your circumstances.

Preparing For Your BAS

Your IAS and BAS can be used to assist in monitoring your business finances. Though you only need to lodge these every quarter, waiting until the due date to get all of the information you require for the statements may cause you to miss out on critical observations (such as how much you may actually owe the ATO).

Daily tracking of your income and expenses can assist in calculating your GST and other liabilities on your BAS, and allows you to ensure that there won’t be any nasty surprises waiting for you.

Here are some tips on how you can prepare for your BAS or IAS this quarter

  • Get everything up to date (such as your accounting software), and ensure that all of your bank feeds are imported, allocated and reconciled.
  • If you are completing the BAS yourself, ensure that the reports from your accounting software are printed off every week – this should give you an estimate of what you would have to pay if your BAS was due right away.
  • Check that your bank account for your business has enough money in it to cover your BAS payment.
  • Create a profit and loss statement after printing your BAS reports to show you how much money has been made in the week (or month) to date