SMSF practitioners should be using the presence of property assets in a fund to inform their peers and their trustee clients about the latter’s ongoing obligations that arise after an acquisition, given these things cannot be avoided, a technical specialist has advised.
Accurium head of SMSF education Mark Ellem said once an SMSF had overcome the hurdles of acquiring property there was a great opportunity to educate everyone involved about the ongoing administration and compliance requirements that followed.
“This is an opportunity for the SMSF auditor to educate the accountant on what evidence will be needed each and every year where the fund owns property or has an investment in an interposed entity that owns property,” Ellem said during a webinar yesterday.
“It’s also a great opportunity for the adviser or accountant to educate the SMSF trustees about their ongoing compliance requirements as it is not just about the actual transaction.”
He pointed out issues related to market value, business real property and in-house asset exemptions each needed to be reviewed on an annual basis as they all had the potential to cause breaches for the fund.
“We’ve got the issue of market value each year and trustees have to train their mind to consider what is the market value of this asset,” he said.
“We also have to disclose it in the annual financial statements and we need to provide sufficient appropriate evidence to the auditor to support the disclosed value in the financial statements.
“If we are leasing property to a related party and used the business real property exception, that will be looked at each year as well.
“It the property is held via an interposed entity, are we making sure if that entity has continued to be a non-related trust or has something happened to now make it a related trust.”
He added checks should also be made to ensure an exempt in-house asset held via an interposed entity continued to comply with the requirements of section 13.22C of the Superannuation Industry (Supervision) Regulations.
“These checks need to be done each year as part of the audit, so we need to educate the SMSF client and set their expectations that they’re going to be asked these questions each and every year,” he said.
