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5 common SMSF mistakes you must avoid


Whoever said SMSFs were easy to manage was lying.  Especially in recent times with all the changes that have come into effect since 2017. But while these rules and regulations are an added challenge, they’re there to protect you.  The key is understanding them so you don’t get stuck. Read on to find the five most common mistakes people are making with their SMSF, so that you can avoid them at all costs.

1.  They withdraw cash from their SMSF ahead of schedule

This is superannuation 101 – do not use the money from your SMSF to pay personal or business expenses before you’re allowed to.

We know it’s tempting, especially when the situation is critical. But taking money from your super account ahead of schedule can result in severe penalties that will cost you greatly. It’s just not worth it.

Always keep your personal and business bank accounts separate from your SMSF.  If you have withdrawn money and you know you’ve breached the rules, our advice is to pay it back as soon as possible before you’re fined or disqualified from running an SMSF.

2.  They don’t have their SMSF investments in the right name

This is such an avoidable mistake, but surprisingly common. By law, the assets of a fund must be in the name of the individual trustees or the corporate trustee.  But sometimes these investments get accidentally mixed in with personal investments.

If for some reason you’re unable to put your SMSF assets in the name of the trustees, supporting documentation that proves the asset belongs to the fund, such as declarations of trust or trustee minutes, need to be shown.

Why does this matter? If a member becomes bankrupt, investments in the name of the fund are protected from the member’s creditors in most cases.  Making sure the names are correct could save you money down the track.

3.  They break the rules

It’s no secret there are many rules and regulations in place when it comes to SMSFs, so knowing them all is a big ask.

The most common rule that’s broken is when there’s a significant link between a person, company or trust and the fund. If the fund makes a loan, invests in or leases assets to a related party, it’s considered a big no-no. Penalties may apply, including the fund losing its tax concessions.

Bottom line: when in doubt, leave it out… and always seek professional help before investing in something you could be linked to.

4.  They don’t pay the minimum pension

If you’re in the retirement phase of your super or receiving a transition-to-retirement pension, it’s imperative you maintain your pensions properly to avoid losing your tax concessions.

If you’ve inadvertently made a mistake that’s resulted in underpayments of the pension, we recommend getting things back on track as quickly as possible with catch-up payments to avoid losing your tax concessions.

5.  They don’t keep track of documents

Filing and keeping up-to-date with your SMSF documentation is key to avoiding compliance issues, including your trust deed, meeting minutes, investment information, and membership and trustee acceptances.  This is crucial for compliance, audit and when the trustees of the fund may be brought to account.

Records that are required to be kept for five years are:

  • Accounting records that provide accurate information about the transactions and financial position of the fund
  • The annual operating statements and the annual statements of the fund’s financial position
  • Copies of all SMSF annual returns lodged with the ATO
  • Copies of any other statements lodged with the ATO or provided to other super funds

Records that are required to be kept for 10 years are:

  • Trustee minutes of meetings and decisions on matters affecting the fund
  • Records of changes to trustees, and a member’s written consent to be appointed as a trustee
  • Trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007
  • Copies of all reports given to members
  • Documented decisions about the storage of collectibles and personal use assets

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Our response to limit the spread of COVID-19

  • As COVID-19 continues to spread, we would like to take a moment to let you know what Financial Spectrum is doing to respond.

    While we haven’t been directly affected with any confirmed cases, we are taking all reasonable precautions to remain safe.Our priorities are:

    1. Keep our staff and clients safe
    2. Stay fully operational in our service delivery and continuing to manage your financial affairs
    3. Play our part in minimising the impact on our community against the spread of COVID-19

    Financial Spectrum has the technology, infrastructure and systems to continue business as usual remotely and our staff will now be working from home.

  • You should notice no change to our service, with the exception that we are encouraging our clients to meet via video call, rather than face to face, unless requested. We will be contacting all clients with meetings booked over the next two weeks with instructions for a video call.This is an evolving situation and we will continue to monitor developments. We will keep you informed of any material changes to our approach.

    These are unprecedented times and we understand that many of you will be feeling unsettled about your finances. We would like to assure you that we are open for business and are here to help you. If you don’t have a meeting booked but would like one, or if you have questions, please contact us at info@financialspectrum.com.au or on
    02 8238 0888

Brenton Tong

Managing Director

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