Managing your own self-managed super fund (SMSF) can be incredibly rewarding, offering more control over your retirement savings and investment choices. This control, however, comes with a big responsibility – especially when it comes to accounting.
That’s why working with our experienced SMSF accountants in Perth is so important: we help you avoid the mistakes that could jeopardise your compliance, increase your tax burden, and put your retirement savings at risk.
To help you stay on track, here are six of the most common mistakes you’re most likely to make when you manage your own SMSF – without the help of a professional accountant.
1. Failing to Diversify Investments
Many SMSF trustees make the mistake of concentrating their investments in a single asset class, such as property or shares in one company, which increases their risk and leaves the fund vulnerable. This means that your investment strategy must be carefully planned across market conditions to avoid ATO scrutiny and protect your fund’s long-term performance.
2. Using SMSF Assets for Personal Benefit
While it may seem obvious, SMSF assets must be used solely for retirement purposes, meaning you can’t live in a fund-owned property, store personal items in SMSF facilities, or display fund-owned artwork at home. The ATO takes breaches seriously, so always ensure every decision benefits the purpose of your fund.
3. Exceeding Annual Contribution Caps
Each year, the ATO sets caps on how much you can contribute to your super fund, and exceeding these limits can result in extra tax and other charges. It’s an easy mistake to make, especially when you’re managing multiple income sources or making last-minute contributions. Staying informed about the current caps and tracking your contributions carefully is key to avoiding an unnecessary tax bill.
4. Purchasing Residential Property from Related Parties
SMSFs are not allowed to purchase residential property from members or related parties, even if the deal seems fair or the price is below market value; the ATO considers these transactions to be breaches of the super laws. Commercial properties are an exception if the transaction meets specific criteria and is done at arm’s length. Always get professional advice before buying property and ensure the transaction follows the rules.
5. Lending Money to Family Members or Related Parties
It might seem harmless to help a family member with a loan using SMSF funds, but doing so could seriously damage your fund’s compliance status. SMSF money must only be used to support your retirement savings – not to help someone else. Lending to related parties is considered a breach unless it meets stringent conditions, and even then, it must be properly documented and follow commercial terms.
6. Neglecting Asset Valuations
One of the most common SMSF accounting mistakes is failing to update asset values each financial year, which can lead to compliance issues and inaccurate reporting. Accurate, market-based valuations are essential, and trustees must be able to justify how those values were determined. Regular reviews help prevent auditor disputes and keep records current.
Staying on the Right Side of the Rules
Managing an SMSF involves a steep learning curve, though many common mistakes can be avoided with guidance from a professional SMSF accountant. Staying informed about the rules, maintaining accurate records, and complying with legal requirements will help safeguard your retirement savings well into the future.