I’ve realised I made an error in my Superfund, what should I do next?
Running a SMSF is not an easy feat and there may be instances where an error occurs, and this might not be identified until months down the track. What should you do in this instance?
Firstly, don’t panic
We are all human and mistakes occur. The most important thing is to face the issue and rectify it. As a trustee of an SMSF it is your responsibility. So what are the options?
Should I try to undo the error before anyone notices?
No. Contact your fund administrator as soon as you realise an error has been made and explain the situation. They will assist you in identifying what is the next course of action to take.
Do not try undoing transactions such as transferring cash in or out of the SMSF as the SIS legislation can be very strict. For example, the treatment of inflows to the fund as contributions and withdrawals as lump sums. You do not want to exacerbate the error by triggering an early release assessment if you haven’t met a condition of release.
Would it be better to keep it a secret from the auditor?
No. Sweeping the matter under the carpet until the annual financial statements and tax return are being audited up to one year later is not a good idea. By doing so, valuable time is lost.
It’s important to be proactive and inform your administrator who may then also inform the auditor. If it turns out there has been a breach of the superannuation legislation and the auditor needs to submit an Auditor Contravention Report, this is not the end of the world. It is much better to be upfront and work with the auditor and implement corrective measures to rectify the issue.
Furthermore, the ATO looks favourably on trustees of SMSFs that voluntarily disclose breaches as it shows that they are doing everything to ensure the fund retains its complying fund status.
Like most matters in life, it is important to meet the problem head on. The ATO is likely to understand if it is an honest mistake that has been rectified as soon as it was found.
If you have any questions in relation to a situation you have found yourself in don’t hesitate to contact your client manager to discuss.
Kreston Stanley Williamson Team
This article was written by Anna Wong.
*Correct as of 26 October 2021
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.