The tax office has alerted SMSF trustees to a number of changes to annual return reporting requirements.
LRBAs. Trustees must report any outstanding loan balances for all limited recourse borrowing arrangement for each member of the fund. The ATO has a preferred methodology for calculating the amount that must be reported.
Cryptocurrency. Cryptocurrencies must now be reported under a dedicated label. Previously they were reported under “other overseas assets”. The ATO defines cryptocurrency as a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain.
Downsizer contributions. Downsizer contributions must be reported in the member section of returns. The total value of all downsizer contributions made by members in 2018/19 must be reported as “proceeds from primary residence disposal”, along with the date the fund received the contribution.
Downsizer contributions should be made within 90 days of the change of ownership of the dwelling (usually the date of settlement). Members must be 65 years or older to be eligible to make downsizer contributions.
The ATO has also changed its requirements regarding annual return qualifications. In previous years, trustees were asked whether Part B of the audit report was qualified. The 2019 SMSF annual return will also ask whether Part A of the audit report was qualified.
“Part B of the auditor’s report gives the auditor’s opinion on the fund’s compliance with super laws. Part A of the report gives the auditor’s opinion on whether the fund’s financial statements are fairly presented, with no material misstatements.”
The ATO says some retirees mistakenly assume they are no longer required to lodge SMSF returns once they are drawing pensions and no longer lodging personal income tax returns. Retirees over 60 who are drawing a pension from their super fund do not pay tax on their income. In addition, the pension account is not taxed on its earnings.
The ATO says the reason all SMSFs must lodge an annual return is that “it is more than an income tax return.”
The annual return includes general information about the SMSF and its auditor, member information, assessable income (if there is any), deductible and non-deductible expenses, losses, information about such matters as family trusts election and interposed entity elections.
It includes a breakdown of the assets and liabilities of the fund, including the market value of the assets. It must include a valuation of in-house assets.
About 14 per cent of SMSFs lodge their annual returns late. The ATO’s view is that non-lodgement is a strong indicator that savings may be at risk. SMSFs that have trouble with their first lodgement often continue to struggle to meet their compliance obligations.