Self-managed superannuation tips revealed

Sunshine Coast legal eagle Pippa Colman has revealed the key element of self-managed superannuation which can come back to bite if ignored.

If you have a self-managed super fund (SMSF), you must not overlook the “managed” part.

If a fund is not properly managed, it can become non complying.

So what you ask? Well for a start, there is a devastating financial impact.

The income of your SMSF is generally taxed at a concessional rate of 15 per cent if your fund is a complying fund that follows the law and rules for SMSFs.

For a non-complying fund, the rate is the highest marginal tax rate. This means that for every year the fund remains non-complying, its assessable income is taxed at the highest marginal tax rate versus the usual 15 per cent.

A certain Mr D now knows quite a lot about non complying super funds.

He was a director of the trustee company of his SMSF and the only member of the fund.

He had taken his funds out of an industry fund to put into his SMSF.

He paid about $7,000 from the SMSF for a course conducted by a Church.

Pippa Colman, Founding Director of Pippa Colman & Associates Law Practice

The course had nothing to do with self-managed superannuation funds or managing them but appears to have had something to do with making money.

Mr D was in financial difficulties and described himself as being ‘on the bones of his a--e’.

There were withdrawals from the SMSF bank account that suggested that Mr D had used about $2650 from the SMSF account for personal purposes.

He received notice from the Australian Taxation Office (ATO) of a refusal by the Commissioner of Taxation to issue a Notice of Compliance ie his fund was non complying.

The returns for the SMSF were reassessed, tax increased and interest charges imposed, all up around $48,000.

Mr D’s objections to the Notices of Amended Assessment were unsuccessful.

He sought a review from Queensland Civil Administrative Tribunal (QCAT).

The deceptively simple issue for QCAT was whether the Commissioner’s decision refusing to issue a Notice of Compliance for the Fund was the correct decision.

Superannuation funds must be maintained for one or more ‘core purposes’ ie to provide retirement benefits to fund members in retirement.

They must not lend fund monies or give financial assistance from the fund to members.

Mr D was found to have contravened these rules. QCAT confirmed the decision of the Commissioner.

Poor Mr D.

His spending less than $10,000 from his SMSF on personal expenses cost him about $48,000 in increased tax and penalties.

Very poor management.

Pippa Colman is the founding director of Pippa Colman & Associates Law Practice.

Originally published as Self-managed superannuation tips revealed