The ATO has listed the top five most frequent errors in SMSF Annual Returns. Understanding and avoiding these mistakes can help ensure a successful and compliant SMSF. These include using a non-unique bank account, incorrect ESA, improper asset valuation, lodging a return with zero assets, and missing auditor details.

Using a Non-Unique Bank Account

It is crucial that all SMSF funds are kept separate from any personal accounts. The bank account used on the SMSF Annual Return must belong solely to the SMSF and should not be a personal or business account.

Incorrect Electronic Service Address (ESA)

As part of the Super Stream changes, all SMSFs must have an ESA for members receiving contributions from non-related employers. A common mistake is using an email address or contact detail instead of the actual ESA.

Improper Asset Valuation

SMSF assets must be calculated at market value and revalued at June 30th of each financial year (or every three years for property). This must be reflected in both the financial statements and the income tax return, and should be independently verified by the auditor.

Lodging a Return with Zero Assets

With the exception of SMSFs being wound up, a zero-balance return cannot be prepared. A fund does not exist until it has assets, typically an initial contribution or rollover from another fund. In cases where the fund was established in one financial year but did not receive its first deposit until the next financial year, the accountant should request a “Return Not Necessary (RNN)” instead.

Missing Auditor Details

All SMSFs must be audited before they can be lodged. To ensure compliance, the auditor’s details should be correct, and the auditor should be given enough time to complete their work before the fund’s lodgement deadline. The ATO recommends having everything to the auditor at least a month before the due date.

Conclusion

By avoiding these common mistakes, SMSF trustees and accountants can ensure a successful and compliant SMSF. Understanding the top five most frequent errors in SMSF Annual Returns, as listed by the ATO, is a good starting point for preventing compliance issues and ensuring the best outcome for the fund.