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Are you about to hand over SMSF financial statements for year ended 30th June 2017 to the auditor for audit - Hold on - Read this article first.

Under the new law, if a member has total superannuation balance equal to the balance transfer cap amount (in 2017 - 18 year $1.6M), a superannuation fund member cannot contribute any further non-concessional contributions to any fund, including the SMSF for which you have just prepared the accounts for.

There are also limits on how much a member can contribute once total superannuation balance of the member is $1.4M & $1.5M which reduces the total amount that can be contributed to evoke the bring forward rule.

Total superannuation balance of the member is what you report to the ATO in the member statement of the income tax return of the fund. This member balance is most likely incorrect, read below why.

 

Why are SMSF assets valued at Market Value on 30th June?

As per SIS REG 8.02B requires all assets of the fund must be valued at market value further, as per Sect 35B(2) of the SIS Act, for the year of income 2012-13 and any later year of income, when preparing accounts and statements required by 35B(1) of the Act, an asset must be valued at its market value.

Market value is defined in Sec 10(1) of the Act, in relation to an asset, means the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller if the following assumptions were made:

(a) that the buyer and the seller dealt with each other at arm's length in relation to the sale;

(b) that the sale occurred after proper marketing of the asset;

(c) that the buyer and the seller acted knowledgeably and prudentially in relation to the sale.

Determining market value of an asset can be difficult if the asset of the fund is not a listed security, for example unlisted shares, unit trusts & property. Readers should also refer to AASB accounting standard 1056 for Superannuation entities and AASB13 Fair Value measurement for guidance on how market value of an asset should be displayed in financial statements.

 

How market value of assets changes member balances?

We must value all assets to market value as on 30th June and credit or debit any unrealized gain or loss to the member accounts per SIS Regulation 5.03 - the trustee of a regulated superannuation fund must determine the investment return to be credited or debited to a member's benefits (or benefits of a particular kind) in a way that is fair and reasonable as between

(a) all the members of the fund; and

(b) the various kinds of benefits of each member of the fund.

Hence any change in market value directly affects SMSF member balance. Usually Accounting software will automatically do these calculations for you and allocate income of the fund, realized and unrealized to each member on daily balance method. Some softwares will allow you to override these automatic calculations and let the administrator do these calculations for the fund.

Please note if the trust deed allows the trustee, some assets can be segregated for investment purposes for any particular member. If a member has chosen a particular asset, the income of that asset (after tax calculations) must be credited to that particular member. This means that software calculations may be inaccurate.

This type of selection of income earning assets can be beneficial where there is a mix of pension and accumulating members. Any income which is credited to a pension member account after commencing continues to be in pension phase. This means that a member can have a higher balance than the $1.6M balance transfer cap amount depending on the income credited to it as compared to pension withdrawals by the member.

Hence, valuation of assets is very critical in two instances, one where the member may want to contribute non-concessional contributions in future and specially for those members whose total superannuation balances are close to $1.6M and second where income has to be credited to pension members and there are accumulating members in the fund, as allocation of income can change the percentage of exempt pension income deduction which the fund can claim in future years.

 


 

Free Webinar

Our technical director, Manoj Abichandani, will be conducting a free webinar where he will unmask all complex issues in regard to valuation of SMSF assets.

This is a must attend event for those who look after funds and prepare financial statemetns. 

Date: 26th Oct 2017

Time: 02:00 PM to 03:30 PM

 

 

 


A D V E R T I S E M E N T

Order an Actuarial Certficate for $55

 

 

 

 


 

How should you determine market value of an asset?

The ATO has issued guidelines on how to determine market value of assets, click here to read (https://www.ato.gov.au/Super/Self-managed-super-funds/In-detail/SMSF-resources/Valuation-guidelines-for-self-managed-super-funds/).

The ATO and SMSF auditor may ask trustees to provide evidence of the valuation method that has been used, this evidence would include documentation of the valuation method used.

They will generally accept your determination of an asset's value, as long as:

  • it does not conflict with ATO's guide or market valuation for tax purposes
  • there is no evidence that a different value was used for the corresponding capital gains tax event
  • it was based on objective and supportable data.

In case of valuation of property, you do not need a qualified valuer each year, it is usually the valuation process undertaken rather than who conducted it that governs the acceptability of a valuation. In all cases the person who conducts the valuation must base their valuation on objective and supportable data.

 


 

Are you short on CPD hours in Audit of SMSF's?

Learn how to Audit a fund in Less than half the time

Click Here 

This activity has been accredited for continuing professional development by the Financial Planning Association of Australia but does not constitute FPA’s endorsement of the activity. 6 CPD hours under self assessment method under RG 243.88 - 90 for Audit of SMSF.

 


 

Can market value be adjusted for selling costs and income tax?

Accumulating members will generally not receive the member balance what is declared in the income tax return of the fund in the member statement, if they were to cash out their balance as on 30th June. The reason is that there will be disposal costs and income tax to be paid on any capital gain.

What members will actually receive may be much less than what may have been declared as the closing balance in the income tax return of the fund as that balance includes unrealized gain but does not factor in disposal costs or any income tax payable by the fund.

Administrators should be aware of these disposal costs and prepare tax effective accounting and account for assets at their true realisable value of the asset to the member, and show member balances in financial statements and income of tax returns on what the member will receive if they were to exit the fund.

For example, say there is a fund with two members with equal member balances which purchased a property for say $2M some years back, the market value of the property is $3.2M as on 30th June 2017 - there is a genuine offer to purchase the property after proper marketing of the property etc.

Under this valuation, no further non-concessional contribution will be allowed as each member has superannuation interest of $1.6M. However, if the trustees decide to roll over their member balance to a public offer fund (you cannot roll over an asset out of the fund - unless under a marriage breakdown situation), trustees will have to sell the property, pay the tax and then roll over the two member balances in cash.

If the property is sold there will be disposal costs such as 2% selling agents fees, say $ 64,000 and then 10% tax on capital gain (after 1/3rd discount - 15% tax) on say $1.2M profit. In this example, $184,000 will be wiped out from member balances if the asset is sold. Under these circumstances, the property should be valued at $184,000 lower giving the two members an opportunity to contribute non-concessional contribution to the fund.

Advisors are recommended not to overstate member balances and use net market value of assets of the fund. This strategy may also help those border line members whose assets are just above $1.6M and are intending to move their accumulation accounts to retirement phase, and want their pension to be under the balance transfer cap amount.

If the financial statements are not yet audited for the year ended 30th June 2017, trustees should re-consider their asset values. Trustees must be very careful in valuing SMSF assets as ATO has mentioned many times that they will be looking at asset valuations very closely in light of CGT relief legislation.

 

Free Webinar

Book for the free webinar where we will discuss some interesting case studies and strategies on how to value assets in your SMSF.

Date: 26th Oct 2017

Time: 02:00 PM to 03:30 PM

 

 

 

 


 

 

Audit SMSF in Half Time - using our online Audit Tool

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Australia’s first online SMSF Audit Software – Fully Automated Online SMSF Auditing Software

 

Workshop : 4 hours from 11.00 am to 3.00 PM

When:

19th Oct 2017 - Baulkham Hills - 2 Seats Left 

14 Nov 2017 - Baulkham Hills - 11 Seats Left

7th Dec 2017 -Baulkham Hills - 12 Seats Left

Where: Suite 3.04, Level 3, 29-31 Solent Circuit Baulkham Hills, NSW- 2153

Cost: $165 incl. GST 

(Includes working Lunch / Coffee + 10 online audits worth $187 + 4 CPD Hours From FPA)

How to Register: Visit  https://www.onlinesmsfaudit.com.au/SeminarBooking.aspx

 

Proposed Agenda

9.00 AM  Registration - Arrival Tea and Coffee

9.30 AM - 11.00 AM  Introduction to Audit Online on SMSF Audit Software and Website Integration

11.00 AM - Morning Tea

11.30 AM - 1 PM How can the accountant and trustee inter act with the software

1.00 PM - 2.00 PM Lunch and Networking 

2.00 PM - 3.30  Advanced SMSF Audit Issues and how to complete and audit in half time

03.30 PM  Workshop Closed

 

Introduction/Overview

SMSF Auditors spend too much time in financial audit and completing manual audit working papers, our online software does most of this work automatically & saves half your time as compared to traditional auditing methods. It checks closing share prices, dividends received from ASX and all mundane tasks of signing, scanning & mailing of audit report, Mgt. letter, engagement letter, Invoice & contravention reports etc. are automated with one click of a mouse.

Embrace an efficient framework for high quality audits and conduct audits on a flawless workflow Management system.

Achieve peace of mind & confidence of knowing that you are using a completely up-to-date online checklist and cloud process to deliver a robust, hassle free top quality SMSF audit. Improve communication with accountants & trustees. Manage 20 or 2000 audits by streamlining workflow from our smart Audit Manager & establish seamless communication between all parties. Our online SMSF audit system is the only tool which can deliver reliability, speed and volume and ultimately profits for your business at a fraction of the cost.

 

Benefits/learning outcomes

Audit from anywhere, anytime from any device on your own website or by integrating with ours. Increase audit effectiveness, add value, reduce audit risk, drive SMSF compliance, revolutionise your business.

Included in the fee is an account to audit 10 SMSF on the online platform worth $187 and Lunch & Coffee.

Those auditors who are already using the online software will benefit by learning new shortcuts and other advanced features of the online software. 

Recommended For

All SMSF ASIC approved auditors.

 

CPD Hours

6 CPD hours under self assessment method under RG 243.88 - 90 for Audit of SMSF.

This activity has been accredited for continuing professional development by the Financial Planning Association of Australia but does not constitute FPA’s endorsement of the activity.

Accreditation number 008743 for 4 hours. Professional Dimensions Capability 2 Hours Professional Conduct 2 Hours - Knowledge Areas;  6 Hours in SMSF

 

Attendee Requirements

Attendees may bring their own Laptops / Ipads for a better understanding - although some attendees may get more from the workshop by looking at the facilitators screen. 

 

Speaker

Mr Manoj Abichandani

ASIC approved SMSF Auditor, B.Bus(UTS), SMSF Specialist (UNSW) CTA FIPA LREA

Manoj has worked in SMSF space for over 25 years, first as an SMSF specialist advising over 600 funds with a CPA firm and later as an SMSF auditor. He develops and lectures on strategies which are practical and enhances retirement benefits of trustees. He has been working for the last 6 years in writing and developing online SMSF audit software- Australia's first SMSF auditing tool.

 

 

      

                           


 

DEED DOT COM DOT AU PTY LTD ABN: 32 123 929 984
Suite 3.04, Level 3, 29-31 Solent Circuit , Baulkham Hills NSW 2153  Phone: (02) 9684 4199

 

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