SMSF record-keeping best practices

Posted on 11 March 2024 | by Allan Hall

ATO reminds SMSFs to keep good records

How self-managed super fund (SMSF) trustees can meet their responsibility to keep accurate tax and super records.

Keeping good records

Keeping good records is more than just knowing which records to keep and for how long. It involves having a system for organising and maintaining records that makes it easier for you, and any SMSF professional you use, to:

complete the fund’s independent audit each year
lodge your fund’s annual return.

It may also help reduce audit and administration costs for your fund.

To help keep your records organised, you may want create separate files for your fund’s more permanent records, and for records that relate to a specific financial year.

For example, in your permanent file you may want to keep:

the fund’s trust deed
the fund’s investment strategy
details of the regular reviews of the fund’s investment strategy, including the consideration of insurance for members of the fund
reasons for decisions on the storage of collectables and personal use assets
minutes of trustee meetings
all signed trustee declarations
records of trustees consenting to their appointment as a fund trustee
records of all changes in fund members and trustees.

As each SMSF is unique, with its own investment strategies to achieve its objectives, you should consult with a professional licensed adviser when setting up a record-keeping system that suits your fund.

Keeping all relevant records together will simplify the process of compiling the records you need to give to your fund’s independent auditor. If your fund regularly holds trustee meetings, you could create a separate folder for them, and sort them by date.

Take minutes of all investment decisions

You should take minutes of all investment decisions, including:

why a particular investment was chosen
whether all trustees agreed with the decision.

This is because if you, as one of the fund’s trustees, invest the SMSF’s money in an investment that fails, the other trustees could take action against you for failing to be diligent in your duties.

However, if your investment decision was recorded in meeting minutes signed by the other trustees, you will have a record to show that they agreed with your actions.

Signature requirements for financial statements

Under Australia’s super laws, SMSF trustees must sign their SMSF’s financial statements before finalising their annual audit. This includes an operating statement and a statement of financial position which must be signed by the required number of trustees or directors of the corporate trustee.

Minimum record-keeping requirements

The most important reason for keeping good records is that it’s a legal requirement for you to do so. You may also need to provide accurate records to us if we ask to see them.

You need to keep any SMSF records for a minimum of 5 years.

Despite what you may have heard or read elsewhere, you cannot access your super before you retire unless you meet one of the very few exceptions to this fundamental rule of super law. Read more »

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administration, audits, best practice, investments, records, self-managed superannuation SMSF, strategy, superannuation, tax

Using business money for private purposes

Posted on 23 October 2023 | by Allan Hall

2 steps to take

If you use money or assets from your company or trust for private purposes and don’t account for the transactions correctly, there can be tax consequences.

That’s why it’s important to get it right.

Business money and assets you take or use for private purposes can include:

salary and wages
director fees
fringe benefits, such as an employee using the company car
dividends paid by the company to you as a shareholder (that is, distribution of the company’s profits)
trust distributions if your business operates under a trust and pays you as a beneficiary
loans from a trust or company
ad hoc drawings or takings
allowances or reimbursements of expenses you receive from a trust or company.

If you’ve used business money or assets from a company or trust for private purposes, follow these steps to avoid unintended tax consequences:

Keep accurate records of the transactions, and
Account for the transactions in the company or trust tax return and your individual tax return, if applicable.

Remember, there are different reporting and record-keeping requirements for each type of transaction, so make sure you know how to keep accurate records to suit your circumstances.

You can also practise good record-keeping habits by regularly cross-checking your records against the original documents so you can fix mistakes earlier and monitor your business’s cash flow.

Taxpayers are ultimately responsible for keeping business records and what you claim in your tax returns, however Registered Tax or BAS Agents like Allan Hall on the Northern Beaches can help and advise on your tax.

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Trust distribution reminder

Posted on 27 June 2023 | by Allan Hall

All trustees need to consider their trust distributions for the 30th June 2023

As we approach the end of the financial year all trustees need to be considering their trust distributions for the 30th June 2023.

Trustee minutes document the trustee’s decision in relation to the distribution of income for the financial year, and many Trust Deeds require the decision to be made prior to the end of the financial year.

This is a reminder to make sure you make your determinations before the end of the 30th June, and we provide a download to a pro forma document (below) to help you record the decisions.

This is for recordkeeping purposes, noting the final distribution amounts (based on your percentage (%) distributions) will be determined, once the final 30 June 2023 accounts and tax returns are complete. It is a record of your decision.

If you have any questions, please contact us on 02 9981 2300.

DOWNLOAD RESOLUTION RECORD FORM (Word doc)

WFH changes and what the ATO is looking for

Posted on 13 March 2023 | by Allan Hall

Calculation and record-keeping requirements of your working from home (WFH) deductions may have changed for the 2022-23 income year.

The 80c per hour temporary shortcut method ended on 30 June 2022.

For the 2022-23 income year you may be able to use either the revised fixed rate method or the actual cost method to determine your working from home deductions.

Whilst the actual cost method remains unchanged, the fixed rate method has increased from 52c per hour to 67c per hour. The revised fixed rate method incorporates the following usage expenses:

electricity
gas
stationery
computer consumables, such as printer ink
internet
phone.

It is not possible to claim an additional deduction for expenses that are already covered by the revised fixed rate method. However, you may be eligible to claim a separate deduction for the depreciation of assets, including items like laptops, mobile phones, and office furniture.

To claim your working from home deductions using the revised fixed rate method, you must be able to provide both:

A representative record of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.
A record of the total number of actual hours worked from home for the period 1 March 2023 to 30 June 2023.

If you choose not to use the fixed rate method, you may be able to use the actual cost method. Please contact your Allan Hall Accountant to assist you in getting the best tax deduction for your personal circumstances.

Regardless of the method you choose, it is important to maintain accurate and complete records for at least 5 years to support your claims for home-based business expenses.

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Paid Family and Domestic Violence Leave

Posted on 9 February 2023 | by Allan Hall

10 Days of Paid Family and Domestic Violence Leave Effective from 1 February 2023

As of 1 February 2023, all employees of non-small business employers (including part-time and casuals) will be able to access 10 days’ paid family and domestic violence leave (FDVL) in each 12-month period.

Small business employees can access this paid leave from 1 August 2023. Until then, they are entitled to take unpaid family and domestic violence leave.

To access this paid leave, in accordance with the Fair Work Act requirements, employees will need to provide notice and show evidence that they require the leave to respond to the impact of family and domestic violence, where it is not practical for them to do so outside of working hours. Employers must accept the evidence, provided that a reasonable person would be satisfied that the employee was entitled to take the leave.

Important payroll implications for businesses

FDVL is counted and paid as time worked. Therefore, an employer must pay the leave at the employee’s full pay rate (inclusive of incentive-based payments and bonuses, loadings, monetary allowances and overtime).
FDVL is reset annually, meaning it does not accrue and each year on the anniversary of employment, the leave count renews to 10 days.
From February 2023, employers must not include information relating to FDVL on the payslip. This includes the balance of leave and when it was taken. FDVL taken by an employee must be recorded on a play slip as ordinary hours of work or another kind of payment for performing work, such as an allowance, bonus or overtime payment.
The balance of or taking of FDVL cannot be displayed on any employee timesheet and attendance portal. There should also be no email or text trail of an employee applying or being permitted this leave. Businesses should restrict record keeping and communication to in person and in writing (in an employee’s physical file) at the workplace only. This is a big change from usual payroll requirements and is for the safety of the victim, as domestic violence offenders will often have access to the victim’s email, work logins and physical mail.
Written notes between the employer and employee that the employee has signed off on should be securely stored to provide evidence that the business has engaged with the employee and provided access to the entitlement, should a future dispute arise as part of an unfair dismissal or adverse action claim.

Suggested Actions for Employers

inform payroll about the rules in relation to providing family and domestic violence leave information on payslips
review or develop a workplace policy which provides guidance for employees who experience family and domestic violence, in respect to accessing leave or additional support
implement an Employee Assistance Program (EAP) to provide an anonymous and confidential forum for employees to express their concerns with trained professionals.

If you would like further guidance or assistance with developing policies and procedures regarding FDVL, implementing new payroll processes, having difficult conversations with employees, or implementing an EAP, please do not hesitate to contact the team at Allan Hall HR.  

Contact us

Our experienced HR Consultants are available to support you with any employee-related questions. Please get in touch with us today on 1300 675 393 or at [email protected] . 

Potential cryptocurrency tax implications on trades

Posted on 14 October 2022 | by Allan Hall

Heard of Bitcoin, Ethereum and dogecoin?

These are a few common cryptocurrencies available in the digital world.

“Crypto” is a virtual currency that nobody controls and there are no physical notes or coins, it’s a transfer of digital assets. That’s right “assets” which triggers crypto tax that you need to be mindful of when preparing your tax return.

In the last few years, the ATO has been targeting crypto and it’s important to understand the tax consequences of owning these cryptocurrencies. If you sold, bought or earned interest from crypto during the last financial year, you’ll need to declare this in your next tax return. The ATO has information when you sign up to Australian crypto exchange or wallets and they are increasing their number of sources to track this data. So, if you have dabbled in crypto, it’s best to speak to your accountant and let them know of your crypto transactions so you don’t get caught out.

Crypto gains can be a very complicated topic to understand as it will depend on your personal circumstances as well as the specific transactions you’re making. Generally, like any asset you own, if you sell or trade/exchange a crypto this is a tax event and the gain or loss on this will need to be reported in your tax return.

Disposing of one cryptocurrency to acquire another cryptocurrency is also treated by the ATO as a taxable event. As there is no physical money being received in this type of exchange, the market value of the cryptocurrency you receive needs to be accounted for in AUD dollars.

The ATO has confirmed that when you’re moving crypto around between your own wallets, this is not a disposal and you don’t need to report it (i.e. not sold or exchanged to another form of crypto and not transferred into someone else’s name as beneficiary). This is because you retain ownership of them and they remain in the same currency. However, you need to keep track of the original costs and fees on transfer of the transferred coins and keep sufficient proof of it.

There is software available to help track and store this data such as Koinly, Ledger Vault and CoinTracker to name a few. Each provides a summary of the buys, sells, gains, losses and portfolio summary for the financial year as well as a detailed tax report.

The most important thing to remember is to keep a record of all your transaction events and to disclose your transactions to your accountant so we can assess and advise on the potential tax implications of how you trade.

CONTACT ALLAN HALL

Fuel tax credit rate changes

Posted on 26 September 2022 | by Allan Hall

Making the correct fuel tax credit claim

If you claim fuel tax credits, multiple rates may apply to your business activity statement (BAS) that is due in October, depending on when you acquired the fuel.

Changes to fuel tax credit occurred on 30 March, 1 July (biodiesel only), 1 August and 29 September 2022.

The easiest way to ensure you are using the correct rate is to use the fuel tax credit calculator.

The temporary reduction of fuel excise duty ended on 28 September 2022. From 29 September 2022:

increased fuel tax credit rates apply. You must only apply this increased rate to fuel acquired from this date
if you’re an eligible business that uses fuel in heavy vehicles for travelling on public roads, you can claim fuel tax credits. You cannot claim between 30 March to 28 September 2022. This is because the road user charge exceeds the excise duty paid and this reduces the fuel tax credit rate to nil.

Remember to always keep accurate records to support any claims. Your records need to show the type, date and quantity of fuel acquired for business activities.

Your registered tax or BAS agent can help correctly calculate your fuel tax credit and lodge your BAS.

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ATO priorities this tax time

Posted on 30 May 2022 | by Allan Hall

Four priorities for the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

record-keeping
work-related expenses
rental property income and deductions, and
capital gains from crypto assets, property and shares.

These ATO’s priority areas ensure that there is an appropriate level of scrutiny on the correct reporting of deductions and income.

Taxpayers can take steps to lodge right the first time

Assistant Commissioner Tim Loh explained that the ATO is targeting problem areas where they see people making mistakes.

“It’s important you rethink your claims and ensure you can satisfy the 3 golden rules,” Mr Loh said.

You must have spent the money yourself and weren’t reimbursed
If the expense is for a mix of income-producing and private use, you can only claim the portion that relates to producing income
You must have a record to prove it.

Record-keeping

With some weeks left until 30 June, start organising the income and deductions records you’ve kept throughout the year. This will guarantee a smoother tax time and ensure you claim the deductions you are entitled to.

For anyone who deliberately tries to increase their refund, falsify records or cannot substantiate their claims, the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Lodge right, no worries

We often see lots of mistakes in July as people rush to lodge their tax returns and forget to include interest from banks, dividend income, payments from other government agencies and private health insurers. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and get your tax return right. If you want to lodge earlier, you must take extra time to manually add all your income.

Available pre-fill information and readiness to lodge can be easily checked in the ATO app this tax time.

NB: While the ATO receives and matches a lot of information on rental income, foreign-sourced income and capital gains events involving shares, crypto assets or property, they don’t pre-fill all of that information for you.

Work-related expenses

Some people have changed to a hybrid working environment since the start of the pandemic, which saw one in three Aussies claiming working from home expenses in their tax return last year.

“If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls,” said Mr Loh.

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Each individual’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring mum and dad.

You can easily keep track of your expenses with myDeductions tool in the ATO app. Just take a photo of the receipt in the app, record the details of the expense and at tax time, simply upload the information directly to your return in myTax or email it to your registered tax agent.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance. If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. We can also ask for supporting documentation for any claim that you make after your notice of assessment issues,” Mr Loh said.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages,” Mr Loh said.

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Employee COVID-19 tests now tax deductible

Posted on 26 April 2022 | by Allan Hall

COVID-19 test expenses

From 1 July 2021, if you’re an employee, sole trader or contractor and you pay for a COVID-19 test for a work-related purpose, you can claim a deduction.

When you can claim COVID-19 testing

From 1 July 2021, to claim a deduction for the cost you incur to pay for a COVID-19 test, you must:

use the test for a work-related purpose, such as to determine if you can attend or remain at work
get a qualifying COVID-19 test, such as a
- polymerase chain reaction (PCR) test through a private clinic
- other tests in the Australian Register of Therapeutic Goods, including rapid antigen test (RAT) kits
pay for the test yourself (that is, your employer doesn’t give you a test or reimburse you for the cost)
keep a record to prove that you incurred the cost (usually a receipt) and were required to take the test for work purposes.

You can only claim the work-related portion of your expense on COVID-19 tests. For example, if you buy a multipack of COVID-19 tests and use some for private purposes (such as by other family members or for leisure activities), you must only claim for the portion of the expense you use for a work-related purpose.

When you can’t claim COVID-19 testing

You can’t claim the cost of a COVID-19 test where any of the following apply:

you use the test for private purposes – for example, to test your children before they return to school or daycare
you receive a reimbursement for the expense from your employer or another person
you work from home and don’t intend to attend your workplace.

You also can’t claim a deduction for the travel or parking expenses you incur to get your COVID-19 test because these expenses don’t have a sufficient connection to you using a COVID-19 test.

Keeping records for COVID-19 tests

You need to keep records of COVID-19 tests to demonstrate that you paid for the test and the test was required for work-related purposes. This may include a receipt or invoice, and correspondence from your employer stipulating the requirement to test.

If you don’t have a record of your expenses before the law changed on 31 March 2022, the ATO will accept reasonable evidence of your expenses. Reasonable evidence is documentation that shows the cost of the test and the requirement to take it for work purposes. This may include:

bank and credit card statements
a diary or other documents, including receipts, that show a pattern of buying COVID-19 tests after the law change that could reasonably have applied from 1 July 2021.

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