Most regulatory problems in super funds are the results of oversight, not deliberate transgressions.   However, it is the responsibility of the trustees to be right.

It is often possible to fix the problems, but the Act makes it mandatory for the Auditor to report on them.   The ATO can impose a number of penalties if it wishes, the highest level being to assess the value of the assets in the fund for non-compliance at the highest tax rate of 46.5%.

These seven issues are the greatest concern of the regulators:

1 . Annual Contributions

Monitor annual contributions before 30 June and ensure contributions do not exceed the allowable Caps, for Concessional/Deductible contributions and also for Non-Concessional/Non-Deductible contributions.   Get it wrong, because the fund can't return the over-contribution, and the tax is 46.5% on the excess contribution.

2. Pensions

If you're under 60 and drawing a Transition to Retirement Pension (TRIS) do not exceed the maximum 10% pension allowed.   With Pensions after 60, you must draw at least the minimum each year.

3. Paying Expenses of a Fund

Trustees sometimes pay expenses or costs from their own monies.   Careful, this counts as a contribution, so the annual Cap may be exceeded (see 1).

4. Property in a Fund

The trustees may pay an expense themselves, which is a Contribution (see 3), the property must be in the name of the trustee, rent has to be documented to be at market value, residential property cannot be leased to a member or associate, but a commercial property can be leased back to the business/employer at commercial rates.   If the fund borrows to purchase an investment property the ATO requires the property to be held in a Bare Trust (also called Custodian or Property Trust).

5. Insurance

Property in a fund may mean that the fund does not have the available liquidity to pay out the interest of a deceased member.   The ATO requires trustees to review their insurances on a regular basis to ensure there will be funds available for a payout.   Note: you do not have to buy more insurance for this but it may be necessary to document matters better, review Wills and distributions, or re-organise existing life policies.   (We can have this reviewed for you, for both Compliance of the fund and for the insurance required).

6. Loans/Borrowing by Fund

A Fund cannot borrow, except through a Bare Trust (see 4) or for a limited number of short term events.   It cannot have an overdraft or long outstanding accounts.   These can attract significant penalties, even non-compliance.

7. Loans to Members

This is never permitted and could result in the Fund being treated as non-compliant.   It is possible to apply to the ATO for access to small amounts in the event of severe ill-health or financial difficulty, but otherwise loans to members are prohibited.

And finally, it is worthwhile to consider Wills and Death Benefit Nominations.   Superannuation is not automatically part of a Will, and if a Binding Death Benefit is in place, it overrules the Will.   This becomes irritating, to put it mildly, in the event of divorce and the super benefits go to an ex.   Not a transgression but an issue to be considered.

We try to "fix" many of the problems we see before the Funds go to the auditors, and we find it is worthwhile to make a Super Fund Review part of our annual End of Financial Year Review, especially the Contributions and Pensions for the year.   It can avoid heaps of concern later.