Accounting, Trusts

Unit trusts need expert accounting

unit trusts accounting

SMSFs investing in vehicles such as pre-1999 unit trusts need to ensure they receive specialist accounting services to avoid poor outcomes.

The need to attain the services of an accountant who has specialist knowledge of SMSFs is most important when trustees are looking to invest in certain types of unit trusts, a senior sector executive has said.

More specifically, SuperGuardian education manager Tim Miller warned this is particularly critical when a pre-1999 unit trust is involved as knowledge of the superannuation in-house asset rules will better allow SMSF trustees to avert significantly poor outcomes.

“We know that if an SMSF owns units in a [pre-1999 unit trust], then they [would] never be [classified as] in-house assets. Also, any additional units acquired up to 30 June 2009, they would never be in-house assets, and then any [units] acquired after 30 June 2009 would be considered an in-house asset,” Miller said while hosting a technical webinar.

“This is where I see a lot of accounting issues [arise].”

The importance of accounting service quality for SMSFs has been emphasised due to the ATO’s focus on having up-to-date valuations of assets in a fund, he revealed, and the fact many SMSFs have not revalued their holdings in pre-1999 unit trusts for a number of years.

He pointed out this combination of factors could lead to adverse outcomes for trustees.

“I’ve seen financial statements where instead of revaluing the asset, and therefore lifting the unit price, [the accountant] has effectively kept the unit price at $1 and just issued more units to fix that situation and increase the value of the [asset held by the unit trust],”he noted.

“Of course, what that’s done is issue additional units [in the unit trust] post 30 June 2009, meaning all of those units, and in many of those instances from a valuation point of view we’re talking about hundreds of thousands of dollars, will be considered to be an in-house asset.”

He stressed the accountant’s understanding of the SMSF in-house asset rules will determine if a fund can avoid this set of circumstances.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital