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Self Managed Super Fund (SMSF) Article
New ATO document a very good read
By Tony Negline.
This article may be out of date.
14th July 2004
The ATO has just republished its guide that helps Self Managed Super Fund trustees understand their roles and responsibilities.
The ATO’s document is a well written and a well structured summary of the super laws as they stood in May 2004.
The super laws are vast and complex and although the ATO has made every effort to be comprehensive in covering as many superannuation regulatory matters as possible, it needs to be recognised that it is impossible to cover every possible legislative issue in such a short document.
From a practical perspective the document says that “if something in the publication is wrong or misleading and you make a mistake as a result, you will not be charged a penalty. You may have to pay interest, depending on the circumstances of your case.”
If a breach is identified by the ATO and a trustee has relied on the recently released guide then obviously there will be arguments about whether this ATO publication is wrong or misleading and whether the trustee actually acted in accordance with the ATO’s guide.
It should be remembered that the ATO’s views on how laws operate alter a little over-time. This is unsurprising because the regulatory environment changes rapidly and knowledge of the law increases over-time. The ATO also has to adapt to changing market behaviour. To cater for these problems the document notes that “we regularly revise our publications to take account of any changes to the law, you should make sure that this edition is the latest. The easiest way to do this is by checking for a more recent version on our website…”
An example of how interpretations can change is the issue of asset ownership when individual trustees run a SMSF. In the past, to assist administrative convenience, the ATO did not require the ownership of the assets of fund to be in the name of every fund trustee.
Many SMSF promoters accepted this view and have advised their clients to act accordingly. This concession is seen as being particularly helpful for SMSF trustees who do not want to change the ownership of an asset because of transaction costs (typically stamp duty and possibly conveyancing).
Others have taken a different view and believe that, even allowing for the ATO concession, there are good trust and tort law reasons why the owner of all fund assets must be all the individual trustees.
The ATO’s guide to SMSF trustee does not discuss this important issue.
However a few weeks ago the ATO issued a document detailing what it believes are the roles and responsibilities of SMSF auditors. In that document the ATO tells auditors that they “should seek evidence of fund ownership of assets, such as property title deeds, share scrips and dividend receipts, to confirm that all assets are held in the name of the fund or in the name of the trustees on behalf of the fund (provided the trust deed allows for assets to the held in the name of the trustees in behalf of the fund).”
Whilst this doesn’t provide a definitive view as to whether SMSF assets should be owned by all trustees, it certainly seems to implies this point. So what are individual SMSF trustees meant to do to avoid getting into strife? Perhaps the first action might be to ask the fund’s auditor what their view is and make sure notes of the response are kept on file.
This ATO document for SMSF auditors is also well written. It clearly shows that the ATO is getting very serious about wanting SMSF auditors to do a good job – the SMSF auditor “plays a crucial role in self managed fund compliance”, this document tells auditors.
Although this particular document is aimed at SMSF auditors, others involved in SMSFs, particularly trustees, may find it useful to read this documents. As the very least it will give the trustee an idea of what their auditor should be doing.
Often documents about superannuation are out of date before they are formally publishe. These recent ATO documents are no exception. During June the government made many changes to the super system. The ATO documents refer to some of the changes as “proposals”.
The ATO have also released another document to be used by SMSF auditors and actuaries who must report to the ATO any contravention of the superannuation laws that may “affect the interests of the members or beneficiaries”. Trustees might find it useful to review this document and the instructions which auditors and actuaries will use when they are completing the contravention report.
Copies of the documents discussed in this article can be found at the following links:
- Role and Responsibilities of Trustees (NAT 11032) http://www.ato.gov.au/super/content.asp?doc=/content/46427.htm
- Role and Responsibilities of Approved Auditors (NAT 11375) http://www.ato.gov.au/super/content.asp?doc=/content/46460.htm
- Auditor and Actuary Contravention Report: http://www.ato.gov.au/super/content.asp?doc=/content/46159.htm
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