2019 SMSF Annual Return – Guidance on new labels

New questions have been added to the 2019 Self-managed super fund (SMSF) annual return.

Part A qualifications

In prior years, you were asked whether Part B of the audit report was qualified. The 2019 SMSF annual return will now also ask whether Part A of the audit report was qualified. Part B of the auditor’s report gives the auditor’s opinion on the fund’s compliance with super laws. Part A of the report gives the auditor’s opinion on whether the fund’s financial statements are fairly presented (for example, there are no material misstatements).

You must now answer ‘yes’ if the audit report was qualified at Part A and/or Part B, regardless of the auditor’s reasons for the qualification. In prior years ATO advised you could answer ‘no’ if the only reason the auditor qualified Part B was because they could not confirm the information provided to them (for example, opening account balances). Your answers must correctly convey the auditor’s written opinion.

This information will help ATO build a more complete risk profile of the SMSF population. This information is only one of the factors the ATO would take into account in making a risk assessment of the fund. The ATO would not generally raise a fund audit or review case based solely on a qualification of Part A of the auditor’s report.

However, if you receive a qualified audit report from your SMSF auditor, you should work to rectify any issues if possible. You can also make a voluntary disclosure to ATO. If the ATO do commence an audit, they will take your disclosure into account in determining any enforcement action and the appropriate level of remission of administrative penalties.

Outstanding limited recourse borrowing arrangement (LRBA) amount

A new label has been added to the Member sections of the 2019 SMSF annual return to report the outstanding LRBA amounts under all relevant limited recourse borrowing arrangements for each applicable member. The reported amounts will be used in calculations of a member’s total superannuation balance. Reporting of an amount at this label only applies to:

• a new LRBA entered into on or after 1 July 2018, or
• the refinancing of an existing LRBA and the refinanced amount increases on or after 1 July 2018, or
• the refinancing of an existing LRBA to acquire different assets on or after 1 July 2018.

Report the value at 30 June of the outstanding LRBA amounts attributable to each member, where:

• the LRBA lender is an associate of the fund, or
• where the member has met a condition of release with a nil cashing restriction.

The members outstanding LRBA is calculated as follows:

• Funds outstanding LRBA × (value of member’s interests supported by the assests that secure the LRBA ÷ value of fund’s interests supported by the assets that secure the LRBA).

Cryptocurrency

A change has also been made to the way cryptocurrency is reported in the Assets section of the 2019 SMSF annual return. Cryptocurrencies, which were previously reported at the ‘Other overseas assets’ label, will now be reported at a dedicated cryptocurrency label.

Cryptocurrency is generally used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain. Cryptocurrency generally operates independently of a central bank, central authority or government.

‘Cryptocurrency’ in the SMSF annual return refers to Bitcoin, or other crypto or digital assets that have the same characteristics as Bitcoin.

Downsizer contributions

Downsizer contributions will now be reported in the Member sections on the 2019 SMSF annual return. The total value of all downsizer contributions made by the member in 2018–19 will be reported at the ‘Proceeds from primary residence disposal’ label and the date the downsizer contribution was received by the fund will be reported at the receipt date label.

If you have any questions, feel free to ask them in the comment section. We will be happy to answer all your queries.