BDO’s Quarterly Superannuation Update

BDO’s Quarterly Superannuation Update | December 2023

Welcome to the final edition of BDO’s Quarterly Superannuation Update for the 2023 calendar year. These updates provide the latest news and insights from the ever-changing superannuation and self-managed superannuation fund (SMSF) landscape in Australia. Keeping up to date with the latest developments and requirements is crucial to fulfilling your obligations and optimising your superannuation benefits.

In this update we will cover important announcements from the Australian Taxation Office (ATO), good record keeping and how this can reduce SMSF compliance and audit costs, upcoming lodgement dates, and a Q&A with BDO partner, Bill Matley.

What is the Regulator Saying in relation to SMSFs?

Client-to-Agent Linking now applies for SMSFs

The Australian Taxation Office (ATO) is the primary regulator in relation to self-managed superannuation funds (SMSFs). From 13 November, the ATO introduced client-to-agent linking to all types of entities with an ABN, including SMSFs. This means in certain circumstances, SMSF trustees will now need to nominate (or link) their tax agent via the ATO’s Online Services for Business (OSB) before the tax agent can act on their behalf.

The ATO has introduced this client-to-agent linking as part of its efforts to enhance security and streamline communication between tax professionals and their clients.

If you are establishing a new SMSF and will be using a tax agent, you can link to your agent by lodging the SMSF ABN registration form and nominating your tax agent as your representative in the application. When the application for the ABN is processed, your tax agent will automatically be linked to your new SMSF and can act on the fund’s behalf.

For existing SMSFs, you will need to follow the client-agent linking steps in the ATO’s Online Services for Business (OSB) in order to:

Add or change a tax agent
Change the authorisations for your existing tax agent.

For SMSFs with an individual trustee, one trustee can complete the linking process by setting up and accessing Online Services for Business (OBS) and completing the agent nomination.

For SMSFs with a corporate trustee, the principal authority needs to complete the client-to-agent linking process. Once they have set up their myGovID, they will need to contact the ATO for support to link the fund’s ABN to their myGovID in the ‘Relationship Authorisation Manager’.

BDO have detailed instructions on how to complete the client-to-agent linking process and will provide them to all new clients.

Note: if BDO is currently the tax agent for your SMSF, you do not need to take any action.

SMSF property investments

The ATO has reminded trustees who are considering buying a property in their SMSF that they should have a detailed understanding of the rules surrounding SMSFs and property. Failure to understand and comply with these rules can result in penalties being applied.

Firstly, the property can only be used for providing retirement benefits to the SMSF members, otherwise it will breach the ‘sole purpose test'. This means you or your relatives cannot live in property owned by your SMSF.

When considering residential property, remember that your SMSF cannot purchase a property from a member or a related party of a fund member, or rent that property to a fund member or any related party of a fund member.

Commercial property has different rules to a residential property. A commercial property that is used solely for business purposes can be acquired by the fund from a member or a related party, providing the acquisition is at market value. It can also be rented to a member or related party, but this also must be rented at market rates.

If the trustees are not able to show evidence that the property is used solely for business purposes or is reported and rented at market value in their financial statements, this is a breach of superannuation laws.

The minimum drawdown rates for super income streams have now changed

In response to the COVID-19 pandemic, the Federal Government temporarily reduced superannuation minimum drawdown requirements for account-based pensions by 50 per cent for the years ended 30 June 2020, 2021, 2022 and 2023.

From the 1 July 2023, this 50 per cent reduction in the minimum pension drawdown rate no longer applies and the drawdown rates will return to the percentages they were at before the COVID-19 reductions were put in place.

The minimum pension withdrawal rates from 1 July 2023 are:

Age at 1 July	Minimum Withdrawal
Under 65	4%
65 – 74	5%
75 – 79	6%
80 – 84	7%
85 – 89	9%
90 – 94	11%
95 and over	14%

Remember to keep this in mind when considering the cash flow of your SMSF for the coming year.

Did you know?

Did you know that while SMSF trustees have a legal requirement to keep accurate tax and superannuation records, good recording keeping can also help to reduce your SMSF compliance and audit costs?

In a previous edition of BDO’s Quarterly Superannuation Update, we detailed the legal requirements that SMSF trustees must meet when keeping records for their SMSF. However, good recording keeping can also help to reduce your annual compliance and audit costs and contributes to the efficient management of the SMSF.

What does good SMSF recording keeping look like?

It pays to understand what good recording keeping looks like when it comes to your SMSF. Good record keeping in a SMSF involves maintaining accurate, complete, and organised documentation of all financial and compliance-related activities. For example, ensure you have a complete set of bank statements for all SMSF bank accounts.

If you have purchased or sold assets during the year, ensure that you have provided your accountant with all relevant documents relating to the transaction. Documentation is essential for accountants and auditors, and if there are missing documents, this creates extra time and extra costs.

How can good record keeping reduce compliance and audit costs?

A complete set of records can help to keep your SMSF compliance and costs down in a number of ways, including:

A more simplified and accurate compliance process

A complete set of records can assist your accountant in preparing a set of accounts that comply with the superannuation laws in a timely and efficient manner. It also can prevent errors being made in financial statements, minimising the need for corrections and rework.

A faster and simplified audit process

Auditors can easily verify transactions, financial statements, and compliance with regulations when records are well-maintained, meaning your SMSF audit will be completed faster than if there is missing information.

Enhanced decision making

As trustee of a SMSF, there are many decisions that need to be made each year when it comes to investments and compliance. Complete records provide a historical perspective on investment decisions and performance, and can assist trustees to make more informed decisions.

Good record-keeping not only helps SMSFs comply with regulations but also contributes to the overall efficiency and effective management of the fund. By avoiding errors, facilitating faster audits, and demonstrating compliance with the superannuation laws, SMSFs can reduce compliance and audit costs and ensure the smooth operation of the fund. Contact our team of superannuation advisers today to find out how we can help you.

Q & A

Bill Matley, Partner, Business Services

Bill Matley is one of the newest partners at BDO, having joined the Sydney office in March 2023. Bill is an experienced Business Services adviser, with a special interest in Superannuation, and this month, he sat down with BDO’s National Leader for Superannuation, Paul Rafton, for a Q & A.

Bill, what initially attracted you to join BDO?

The people! I had been working as a partner in a smaller firm for a long time and it became a struggle to assist clients as their affairs became more complicated. I was using BDO to provide tax advisory services for my clients and had such a good experience that I was very happy to join BDO when the opportunity arose.

You are a Business Services adviser, and you have a special interest in superannuation. What is the most common question you are fielding from clients, and how are you responding?

I tend to get a lot of questions about making property investments in super - a lot of members like the concept of having a tangible asset in their fund. This can be especially useful for businesses looking to acquire a commercial property that can be used as an office. When acquiring a property in super, it is very important to get the process correct and also understand the ongoing obligations of owning property in superannuation. I would definitely recommend discussing this with your adviser if you are thinking of this strategy.

What are some of the more common mistakes you see trustees making, and what can they do to avoid making these mistakes?

There are some common mistakes that I see in a lot of funds, for example using personal bank accounts for receiving fund income or paying expenses. One of the more complicated issues that I am seeing frequently is in relation to property investments. It is very important that trustees understand the requirements of owing the property in super, especially if the lease is with a related party. These obligations include:

making sure a lease is in place and is on arms length terms
obeying the terms of lease, e.g. rent paid on time, rental increases are correctly applied
providing an updated market valuation annually
ensuring a correctly structured limited recourse borrowing arrangement

These obligations are ongoing and trustees should be reviewing these items annually at least.

Superannuation key lodgement dates

Deadline	Description
Payment of super guarantee contributions.	28 days after each quarter ends e.g. SG contributions for the June 2023 quarter must be paid by 28 July 2023.
Lodgement of tax returns for newly established SMSFs.	28 February 2024 (payment is also due on this date).
Lodgement of tax returns for SMSFs with income in excess of $2 million in the last income year lodged.	31 March 2024 (payment is also due on this date).
Lodgement of all other SMSFs.	15 May 2024 (payment is also due on this date).
Transfer Balance Account Reports (TBAR).	All SMSF’s are now required to lodge TBARs on a quarterly basis, regardless of the member’s Total Super Balance (see above).

DISCLAIMER:

The information contained in this publication is purely factual in nature and does not take into account your personal objectives, financial situation or needs. It is provided as an information service only and does not constitute financial product or other professional advice and should not be relied upon as such. Before making any investment or financial decisions you should consider your particular objectives, and financial circumstance or needs. Where information relates to a particular financial product you should obtain and consider the relevant Product Disclosure Statement and obtain advice from a financial adviser before making any decision. If you do require financial advice, please contact the relevant BDO member firms in Australia who will be able to assist you in their capacity as an Australian Financial Services licensee. BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this publication nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded.

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