End-of-year considerations offer a crucial opportunity to highlight key tasks requiring attention for SMSFs.

As 30 June 2024 approaches, SMSF trustees and members should ensure compliance and readiness for the new financial year.

Given that 30 June falls on a Sunday this year, it's possible that some clients may be caught off guard. To assist you in being organised, here's our checklist to ensure you're prepared.

Cash contributions play a pivotal role

Timing is paramount:

• Contributions must be received by the fund to be recognised (especially significant when nearing the 30 June deadline)
• Electronic transfers within the same bank typically occur instantly, aiding last-minute contributors, but interbank transfers may delay receipt.

Small Business Superannuation Clearing House (SBSCH) changes

The ATO recently issued an update to the SBSCH process for securing bank account validations for SMSFs. This serves as a timely reminder for clients utilising the SBSCH service to verify that their SMSF's bank details are current and accurately registered with the ATO to avoid payment rejections.

Clearing house processing

A contribution cannot be recorded by the superannuation fund until it is received. Employers' payments to clearing houses may not count as contributions until received by the SMSF, potentially delaying the financial year record for the contribution. This is despite the fact that payments made to the ATO's SBSCH will constitute a payment for SG purposes, when received by the clearing house.

June contribution 'reserving' strategy

Considering that contributions only count towards the member's contribution cap in the year they're allocated, it's important to note that:

• The concessional cap for the 2024-25 financial year is set to rise from $27,500 to $30,000 starting from 1 July 2024
• It's recommended that any contribution intended to be 'reserved' and allocated at a later date be made separately from any other contributions not designated for reservation.

Pensions considerations

As with contributions, it's important to deal with any requirements for the year:

• Meeting minimum payment requirements before 30 June ensures recognition in the current financial year and is vital for claiming exempt current pension income
• For a pension payment to be recognised in the 2023-24 financial year it must leave the superannuation fund's bank account no later than 30 June 2024
• Failure to meet payment standards could lead to the SMSF being ineligible to claim exempt current pension income (ECPI) for retirement phase pensions.

Asset valuation must reflect market value at 30 June

ATO updates have raised concerns about not all trustees adhering to this requirement, indicating that certain asset values have remained unchanged for three consecutive financial years, so trustees should expect closer scrutiny from auditors and regulators this year. It is important trustees are aware that:

• An annual assessment of the market valuation of an asset is required by the SIS Act
• The evidence to support the valuation must be objective and supportable
• Unresolved valuation of asset contraventions may lead to further Auditor Contravention Reports and ATO penalties.

Related party lease agreements

When evaluating investments, especially if a fund has a lease agreement with a related party, it's crucial to confirm its validity and check if it has expired:

• Failure to maintain a legally enforceable current lease could lead to the classification of business real property as an in-house asset
• For related party lease agreements:
  • Ensure all terms are adhered to, particularly the correct rent payment to the SMSF
  • Verify that any changes to the rent amount on each anniversary are implemented — this could involve rent adjustments based on CPI, a fixed amount or a market review
  • If a market review is necessary, SMSF trustees should gather evidence from an industry expert to demonstrate that it was conducted on an arm's length basis — this evidence should be provided to the auditor.

Other housekeeping best practices

Regularly reviewing the fund's strategy, especially before the new financial year, aligns investments with strategy and minimises scrutiny from auditors.

It's important to review the management letter and audit report from the previous financial year — ensure any identified contraventions, issues or concerns are addressed before the end of the current financial year.

For SMSFs awaiting finalisation of their 2022-23 financial year audit, promptly address any issues raised as time may be limited for resolution.

As the financial year draws to a close, SMSF trustees and super fund members are urged to prioritise essential year-end considerations to maximise their fund's effectiveness and compliance.