Compliance, Investments, SMSF

Verify asset location before filing SAR

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Understanding the jurisdiction of an asset an SMSF has chosen to invest in is crucial for meeting the fund's annual reporting requirements.

Care must be taken to identify the location of an asset held by an SMSF as reporting this information incorrectly could cause compliance issues for trustees when submitting their fund’s annual return, according to the partner of an international accounting firm.

“A lot of people [complete the SMSF annual return] wrong. I’ve seen fund members reporting overseas assets where their investment is actually in an Australian managed investment,” Deloitte superannuation, SMSF and retirement savings partner Liz Westover told attendees at the SMSF Association National Conference 2024 in Brisbane last week.

“They want to get that overseas exposure, but they don’t have the confidence or the wherewithal to directly invest in foreign jurisdictions so they do it through an Australian investment fund, but that is actually an Australian investment and that’s the way it should be reported in the SMSF annual return.

“Be careful about the way you’re reporting some of these assets and whether or not they really are Australian assets or whether it is the foreign investment itself, and how you’re reporting income and expenses, calculating foreign exchange rates and how it actually flows through into the SMSF annual return.”

According to Westover, employing specialised software platforms tailored for reporting overseas investments, equipped with features to incorporate current foreign exchange rates, can enhance the accuracy of entries in the SMSF annual return.

However, she advised using an independent party to review the return to ensure its accuracy and completeness before it is finalised.

“You shouldn’t always be relying on the software to do this for you. Yes, it’s very helpful most of the time and it’ll probably get it right,” she noted.

“As soon as you get some complexities, you should be double-checking them to make sure that the calculations [are accurate] and there’s no glaring areas in there. [For example], dates can make a huge difference and exchange rates aren’t always right.

“Particularly tax agents, if you’re the one that’s signing off on [the SMSF annual return], make sure you’re comfortable that calculations are done right and it’s been reported correctly in the start before you sign off.”

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