As the current 2020–21 financial year draws to a close, it’s time for a quick fire health check to make sure your client’s SMSF finishes the year with no compliance issues or missed opportunities. There are several fund transactions that are time critical and with the final month of the financial year only a day away, time is running out to ensure:

  • A contribution is received and counts toward the correct cap, in the correct financial year;
  • The minimum pension has been paid to secure the SMSF’s claim for exempt current pension income;
  • In-house asset rules have been complied with;
  • The investment strategy has been reviewed;
  • Any fund residency concerns are identified, with an action plan at the ready.

With the indexation of the general transfer balance cap to $1.7million on 1 July 2021 and the commencement of a ‘personal transfer balance cap’ regime, it’s prudent to ensure that all reportable transfer balance account (TBA) events have been correctly reported to the ATO. Further, for TBA events in the lead up to 30 June 2021, it would be beneficial that they be reported without delay, to ensure the ATO’s calculation of a member’s entitlement to proportional indexation of the general transfer balance cap is based on accurate and complete information.

It’s also time to be thinking about what documentation may be required to substantiate year end market values of assets that will be disclosed in the annual financial statements. Some assets, particularly those without a ready market, may require an independent valuation to be arranged or a prior valuation reviewed and updated. Market value of fund assets at 30 June 2021 can also influence the determination of a member’s entitlement to certain caps and concessions for the 2021-22 financial year.

A review of the auditor’s management letter and audit report for the previous 2019-20 income year, is another worthwhile task to ensure that any identified contraventions, issues or concerns previously raised have been dealt with prior to the audit of the 2020-21 financial statements. A previously identified contravention that has not been rectified can lead to a contravention report being lodged with the ATO. Rectification of contraventions, prior to reporting may be a mitigating factor when the ATO is deciding on any compliance action or imposition of penalties.

Use our SMSF 2021 Year End Check List to tick off the essentials that need to be considered before the financial year ends, ensuring your client’s SMSF will be ready for the 2021 compliance season.

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