Compliance, Regulation

Best financial interests duty not a chore

SMSF best financial interests

SMSF trustees should have no difficulty complying with the incoming best financial interests duty as it coincides with their interests as beneficiaries.

SMSF trustees are now required to comply with the best financial interests duty (BFID) introduced as part of the Your Future, Your Super reforms, but the ATO has suggested this will not be an onerous task for them.

The regulator reminded trustees the BFID will be compulsory for all superannuation trustees from 1 July when the reforms take effect after the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 passed through parliament and received royal assent in the past two weeks.

“From 1 July 2021, as trustee of an SMSF you must perform your duties in the best financial interest of beneficiaries, compared to previously performing your duties in the best interest of beneficiaries,” it stated on its website.

“The intent of this measure is to remove ambiguity on how superannuation trustees should spend members’ money and applies to both self-managed super funds and APRA (Australian Prudential Regulation Authority)-regulated funds.”

The ATO did not expect this to be difficult for SMSFs, adding: “We do not expect this to have any major impact to your role as trustee, as you are also most likely the beneficiary or one of the beneficiaries of your SMSF and have always been acting in the best financial interest of yourself and other beneficiaries.”

SMSF trustees were, however, warned a failure to act in the best financial interests could result in other contraventions that were reportable by the fund’s auditor and could result in the ATO initiating an audit on the SMSF.

Earlier this year, SMSF Association deputy chief executive Peter Burgess said the BFID was not a cause for alarm and pointed out trustees who provided financial assistance to members or relatives were more likely to be in breach of the rules.

The ATO added any trustee who believes they have not acted in the best financial interests of an SMSF’s beneficiaries should use the regulator’s voluntary disclosure service.

In other ATO news, the regulator stated that it had concluded its ‘most successful mailout’ to approved SMSF auditors and, via the responses gathered from that group, have identified identify tax professionals who have submitted SMSF annual returns (SARs) they may include incorrect SMSF auditor numbers (SANs).

Those identified will be asked by the ATO to review the SAR for the 2018-19 year for the identified fund to ensure the auditor details provided are correct.

“We are still seeing a large number of returns which have inadvertently reported an incorrect SAN.

“Reporting incorrect SANs on SMSF client’s returns can have adverse impacts on both your practice and your clients and could result in a referral to the Tax Practitioners Board.”

The ATO recommended that when tax professional are completing Question 6 of the SAR they use the relevant information in the SMSF independent auditor’s report (IAR) – including the SMSF auditor number, name, address and the date the auditor signed the IAR as the date the audit was completed.

Additionally, tax professionals should also check that prefilled or rolled over auditor numbers from prior year lodgements were still correct and review the IAR and report any qualifications of Part A and or Part B.

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