As a relatively young but rapidly evolving model, SMSF compliance guidelines contain more than their fair share of unnecessary and arbitrary rules.
The 10 SMSF rules that need urgent reform: Ken Raiss
Amid increasing pressure on trustees of self-managed super funds (SMSFs) to keep pace with the steady stream of quiet pronouncements from the ATO, we turn the spotlight on some overlooked SMSF guidelines in need of urgent reform in 2013.
SMSFs are most often used to provide for retirement income for all family members, yet four trustee positions would not be enough to cater for the average Australian household. The figure should respond to the nation’s needs as opposed to forcing families to either leave family members out of the SMSF or pay to set up an additional fund.
Should a trustee require money to renovate a property, it cannot be loaned in an SMSF because it is considered to increase risk, though trustees are still allowed to borrow money to purchase that property or asset in an SMSF.
Instead of adding acquirable assets with debt into the same trust structure, trustees must pay to set up another.
Those who experience a change in circumstances while doing so, such as entering a new age group or different health, could find their new policy does not provide the same cover as their previous insurance policy, or worse still, cannot be re-written.
This should also apply for a person’s own occupation.
It is, however, acceptable to do the same with commercial property or shares. As long as the sole purpose test is passed there should be no limitation on from whom the asset is purchased if executed at arm’s length.
This is age discriminatory. Anybody should be able to benefit from the three-year average contribution entitlement regardless of age.
This rule is discriminatory, especially as more Australians are both living and working for longer.
However, the big superfunds, covered by their associations, adopt legislation changes automatically. An SMSF deed, through legislation, should automatically pick up any changes to the SIS Act.
Excessive penalties should be axed for genuine errors.Ken Raiss is a certified accountant and director of Chan & Naylor national accounting firm. Chan & Naylor offers a free five-minute question-and-answer session on its website under the "Ask the Experts" section.