While a Self-Managed Super Fund (SMSF) can arguably provide better returns and an abundance of benefits for your future, it will also be undeniably harder to look after than a standard industry fund. For example, one of the most complex issues you will face when making use of an SMSF is remaining compliant with all rules, regulations, and requirements.
With the ATO cracking down on SMSF Trustees this year, it’s important to ensure that you’re meeting all of your obligations. Below, you will find a breakdown of the most important things to know about this crackdown.
You’ll Need to Have Your Taxes Done Professionally
When you have an SMSF, it’s important to also engage an SMSF tax accountant. Getting your taxes done professionally helps ensure that you’re only claiming what you’re entitled to. A professional will also be able to organise everything in a way that is compliant with the regulations set out by the ATO.
You Can’t Dip in for Personal Use
Another thing to be aware of is that you cannot dip into your super for personal use. When you’re operating an SMSF, it is much easier to access your money than it is with an industry fund, but this doesn’t mean you should. Touching your super for personal use is not allowed under most circumstances, so it is important to avoid the temptation. If you do give in, you could face some pretty serious issues.
You Need Diversity in Your Investments
When handling the investment of your funds within an SMSF, there are diversity requirements you’ll need to meet. Inadequate diversification is a significant issue with SMSFs, and this is one of the key things the ATO is cracking down on from 2023 onward. This can be a complex area, and it’s important to seek professional advice if you’re unfamiliar with the regulations. Reach out to a Melbourne-based financial advisor specialising in SMSFs to ensure you have everything lined up as it should.
Liquidity Must Cover Fees
In addition to having a properly diversified investment strategy, you’ll also need enough liquidity in your SMSF to cover any fees and charges incurred through the management and running of the fund. These fees will vary depending on how you have things set up, but it is important to ensure that there’s always enough available to cover the bills.
When it comes to assets such as cash that can be easily spent or transferred, we suggest speaking with your accountant or auditor to determine exactly what is and isn’t considered liquid within your SMSF.
You Must Consider Insurance
Finally, there are insurance requirements that must be met when handling an SMSF. These requirements can vary, so it is vital that you check with a professional to ascertain what you do and don’t need coverage for. As a general rule, it is a good idea to have slightly more coverage than you may require. However, you should always check with a financial advisor or insurance professional.
An SMSF is a great way to take control of your future and improve your financial knowledge and situation. Of course, that doesn’t mean it will be a simple process or one that comes without risk. With the ATO cracking down on SMSFs now more than ever, it is important to ensure that you avoid these mistakes and keep all of your ducks in a row. If you think you may have exposed yourself to any of these issues, we strongly recommend speaking with a financial professional and rectifying the problem as quickly as possible.