February 28, the deadline for lodgement of annual returns by Self Managed Super Funds (SMSF), is looming large.
In anticipation of the deadline, I had a chat with H&R Block's Director of Tax Communications, Mark Chapman, to find out more about SMSFs and discuss what those facing the deadline need to do.
According to Mr Chapman, SMSFs are currently extremely popular in Australia; "…the latest ATO figures show there are about 600,000 SMSFs currently. The amount that is invested in SMSF is about $750 billion in assets, which is about a third of all the assets in the superannuation system."
What is the SMSF deadline?
If you don't have a tax agent looking after your SMSF, then you need to lodge its annual return by 28 February. Those with a tax agent can rest easy, thanks to an extended deadline.
Mr Chapman remarked, "If you do have a tax agent, then generally you are entitled to an extended deadline which is at least 15 May, So if you've got a tax agent on the case, you probably won't have to worry too much."
"Accountants can look after this kind of thing for you. There are SMSF specialists – H&R Block has an SMSF division that does nothing but SMSF on behalf of clients."
He warned, however, that if the SMSF is newly established the 28 February deadline still applies, even with a tax agent.
What do you need to do ahead of the SMSF deadline?
If you have an SMSF and don't have a tax agent, once the audit of your SMSF has been finalised, you need to lodge its annual return with the Australian Tax Office through Standard Business Reporting. You can also choose to lodge a paper return and post it to the tax office. As SMSFs assess their own tax debt or refund, the tax office does not issue a notice of assessment.
Of course, if do you have a tax agent, they will take care of your return ahead of the applicable deadline.
What is included in SMSF annual returns?
SMSF annual returns are more than just an income tax return. They are also used to report superannuation regulatory information, member contributions, and to pay the SMSF supervisory levy.
According to Mr Chapman, you can't just set up an SMSF and forget about it, "you have to be involved 365 days a year in making sure that you are complying with all the laws around managing an SMSF, which are quite complex."
What if your SMSF does not have a tax liability?
You still need to lodge your SMSF annual return even if your SMSF does not have a tax liability for the income year.
What if you make a mistake in your SMSF return?
If you make a mistake in your SMSF return you can amend it by making a voluntary disclosure. You can do this by lodging an amending SMSF return. This means you must resubmit the whole return, not just the parts you want to change.
What happens if you fail to lodge the return by the SMSF deadline?
If you fail to lodge your SMSF return by the due date it can result in penalties and the loss of your SMSF's tax concessions.
Mr Chapman advises those with SMSFs to "…make sure you comply with your obligations and make sure you lodge your annual return with the ATO. If you don't do that you could potentially put the existence of the fund itself at risk."
What do you do if you can't meet the SMSF deadline?
If you are a self lodger and think you will have issues meeting the deadline, Mr Chapman advises you "go and speak to an accountant between now and the 28th so that they can put in place a plan to get you access to those longer taxation deadlines."
Engaging an accountant to assist with the administration of your SMSF can be a smart move – by utilising the skills of an expert you can ensure you comply with your SMSF obligations as well as removing some of the burden from yourself.
The Motley Fool Australia has no commercial affiliation with H&R Block.