SMSF Tax Return and Why you should lodge it on time?

 

SMSF Tax Return

SMSF Tax Return (NAT 71226) covers reporting of superannuation income, deductions, tax outcome, member contributions and payment of super levy to tax office. It is more than an income tax return and has eleven sections. All SMSFs must lodge tax return every year irrespective of income or if it is in 100% pension phase. It can be lodged through software or paper form. To help to complete you superannuation annual return you can use Self Managed Superannuation fund annual return instructions (NAT 71606).

Why you should lodge SMSF tax return on time?

1.  To avoid penalties – Setting up an SMSF gives more control, flexibility to invest and investment decisions. At the same time Superannuation laws provides responsibility to trustee to follow the super industry rules and one of the them is the reporting requirements. Trustees need to lodge superannuation or SMSF Tax Return every year on time and provide activity during the year details to the tax department in the form of tax return lodgement including member contrition, answering qualified questions,
income, deductions, tax payable and super levy payments. Late lodgement of the
tax return gives rise to failure to lodge penalty. This will have impact on
retirement savings which is the sole purpose of having an SMSF.

 

2.      To work contributions availability for next year – Superannuation industry rules change frequently and to work out next year contributions availability SMSF Tax Return needs to be lodged on time and financials including member statements needs to be prepared to work out members balance at the year end. For non-concessional contributions members are only eligible to make the contributions if their total super balance in the end of the previous financial year is less than the general transfer balance cap
and if their balance is equal or more than the general transfer balance cap at
the end of the previous financial year their non concessional contribution cap
is nil for the current year (need to follow other rules as well). If eligible
for bring forward rules it is important to know the previous year end balance
as bring forward availability and calculation will be done according to members
age and last years end balance. Also to take advantage of unused carry forward
concessional contribution rule previous years member balance is required as
this in only available if the member balance (total superannuation balance) at
the end of the previous year is less than $500000. To work out all these caps
and rules trustee need to ensure they lodge tax return on time and get member’s
last yearend balance.

 

3.      Superfund lookup status – As an SMSF trustee they have the responsibly to lodge tax return every year on time. Failure to lodge superannuation tax return on time and if the overdue return is for more than two weeks’ time, SMSF will risk the status on Superfund lookup changed from complying to regulation details removed. If this status is showing on the Superfund lookup trustees might not be able to get employer contribution into the fund and if need to register Electronic Service Address (ESA) to get rollover or do rollout they cannot register ESA until the status changed back to complying. This can delay the rollover process as once the overdue returns are lodged the status will not immediately change to complying as it can take some time.

 

4.    Next year SMSF tax return due date – Superannuation Tax Return lodgement is required every year and depending on if the fund is new, existing, lodged by trustees or lodged by tax agent lodgement due date can vary. If trustee lodge by themselves due date for newly registered SMSF is 31st Oct for the first year after the end of the financial year and 28th Feb of next year for existing SMSFs. If lodge by tax agent they get some extra time which is 28th Feb for newly SMSFs and 15th May for existing SMSFs. From second year the extra time of 28th of next year to trustee and 15th May to tax agents is only available if the previous tax return was lodged on time. If it was not lodged by due date then to trustees and tax agents its 31st Oct after the end of the financial year. So, to get extra time for the return lodgement trustees needs to make sure previous return was lodged by the due date.

 

5.      For pension payment calculations – Pension payment calculations for the year are done according to the members age and previous years member pension account balance. Minimum pension payments are required to be withdrawn according to the set percentage every year. If the SMSF has transition to retirement then minimum and maximum payment rules needs to be followed as well. To make sure members withdraw accordingly trustees need to make sure funds accounts and tax return is prepared on time for these calculations.

 

6.      Wind up process – At some stage SMSF might need to be wind up and withdraw or rollout members balance according to superannuation rules. If members balance needs to be rollout to other fund trustee might need to register for ESA to process the rollout through super stream standards. If the returns of SMSF are overdue trustee will not be able to register ESA through the accounting software and until the Superfund lookup
status updated to complying. So, trustee need to make sure returns are lodged
on time so that there is no delay in the rollout process.