Most of the problems I see in SMSF audits didn’t happen in June. They happened in August, or October, or February, when a trustee made a decision without writing it down, let a pension payment drift, or assumed their investment strategy from the prior year was still good enough. By the time the auditor asked about it, the financial year was already closed and the options for fixing it had narrowed considerably.
That’s the real reason the start of the financial year matters. Not because there’s a deadline looming, but because the twelve months ahead are still entirely open. Set the right habits now and the year runs cleanly. Leave it until June and you’re managing consequences rather than preventing them.
In our most recent Prime Insights webinar, I walked through seven areas that every SMSF trustee should be focused on right now. Here’s the full picture.
SMSF borrowing is changing – know where you stand.
This is the most significant structural change for SMSFs in some time, and it’s worth understanding clearly rather than assuming it doesn’t apply to you.
The government has announced, as part of a deal with the Greens, that new limited recourse borrowing arrangements for residential property held in SMSFs will be banned. The ban applies to new arrangements only, and it takes effect 45 days after the legislation receives royal assent. Existing SMSF loans are not affected. Contracts signed before the commencement date are also not affected, and there’s a 45-day transition window for deals already in progress.
SMSF borrowing has always been the exception to a general rule that prevents super funds from borrowing, and it’s been under scrutiny since at least the Murray Review in 2014. The change is coming, but it affects a relatively small slice of the market: SMSF borrowing represents less than 1% of total residential property lending in Australia.
What this means practically depends on where you sit. If you have an existing LRBA, nothing changes. If a new LRBA was part of your plan, it’s time to talk through the alternatives with your financial adviser.
Know your contribution caps and plan all 12 months.
One of the most consistent mistakes I see is trustees treating contributions as a June problem. They leave it to the final weeks, realise they have capacity they haven’t used, and then rush to make contributions before the year closes, sometimes getting the timing wrong and sometimes missing the window entirely.
The concessional contributions cap, covering employer super guarantee, salary sacrifice, and personal deductible contributions, and the non-concessional cap for after-tax contributions, are separate limits with different tax treatment. Both reset on 1 July, which makes right now the ideal moment to map out your contribution strategy for the full year ahead rather than reacting to it later.
The carry-forward rule is worth understanding properly if you haven’t fully used your concessional cap in prior years. If your total super balance is below the threshold, unused cap amounts from the previous five years can be carried forward and used in a single year. This is a genuine planning opportunity in years where income is higher than usual, but it requires knowing what unused room you have before you can use it deliberately rather than guessing at it in May.
My strong suggestion: spread contributions across the year rather than concentrating them in a single payment near year end. It reduces timing risk, it’s easier to manage from a cash flow perspective, and it removes the stress of a last-minute contribution that needs to be received by the fund before 30 June, not just initiated.
Pension payments: Recalculate now and schedule early.
If you’re drawing an account-based pension from your SMSF, your minimum pension payment needs to be recalculated on 1 July each year. The minimum is a percentage of your account balance at the start of the year, and the percentage increases as you age, so the number from last year almost certainly isn’t the right number for this year.
The consequences of missing the minimum pension payment are real and significant. If the full minimum isn’t paid out of the fund before 30 June, the pension may lose its Exempt Current Pension Income status for the year, which means the fund potentially pays tax at up to 15% on income from what should be tax-exempt pension assets. For a fund with significant pension assets, that’s a material and entirely avoidable cost.
The practical step is straightforward: recalculate the minimum now, schedule payments across the year rather than leaving everything to a single transfer in late June, and make sure the payment actually leaves the fund in time. A transfer initiated on 29 June that doesn’t clear until 1 July is not a payment made within the financial year.
If your fund has multiple members in pension phase, each pension account needs to be treated separately, and each drawdown needs to meet its own minimum.
Review your Investment Strategy – On the record.
Every SMSF must have a written investment strategy, and it must be reviewed at least once a year. What the legislation requires is a genuine review that reflects the fund’s actual investment position and the personal circumstances of each member, not a template document that hasn’t been touched since the fund was established.
Auditors are required to check that a current, compliant investment strategy exists and has been reviewed. The factors it needs to address include diversification across asset classes, the fund’s liquidity position, the risk and expected return appropriate to the members’ ages and retirement timeframes, and whether each member should hold insurance cover through the fund.
The most common issue I see isn’t that trustees have a bad investment strategy. It’s that they have a decent strategy that nobody actually reviewed this year, or that they reviewed it informally without recording that the review happened. An undated, unsigned strategy, or one that doesn’t reflect the fund’s actual holdings, is one of the most common findings that leads to an audit qualification.
If your fund’s asset mix has shifted over the year, that’s not necessarily a problem, but the review needs to note the change and the reasoning behind it. Set a date now, conduct the review, sign and date the updated document, and keep it with the fund’s records. It takes less than an hour for most funds and it’s the difference between a clean audit and an uncomfortable one.
Documentation: Build the record as you go.
This is the area that causes more stress at audit time than any other, and it’s almost entirely avoidable with a small amount of discipline throughout the year.
Every significant trustee decision needs to be supported by dated minutes. Contribution strategies, pension commencement decisions, investment strategy reviews, changes to the fund’s asset allocation, insurance decisions, and anything involving a related party all need a paper trail. Auditors can only assess what they can verify, and a decision that was made with good intentions but wasn’t recorded is indistinguishable, from an audit perspective, from a decision that wasn’t made at all.
The most common audit queries I see relate to missing signatures on strategy documents, minutes that were backdated or reconstructed after the fact, and trustee declarations that were never collected when a new trustee was appointed. None of these are difficult to address if you catch them at the time. All of them are genuinely stressful to deal with under a 14-day audit response deadline.
My practical advice is simple: don’t let the record fall behind. When a decision is made, minute it the same day. When a strategy is reviewed, sign it that week. Rebuilding a full year’s worth of trustee records in the weeks before your return is due is where errors happen and where compliance risk is created, often by trustees who were doing the right thing but just hadn’t written it down.
Compliance: Test the things you might be assuming.
There are three compliance areas that I see create problems regularly, and in each case the issue is usually not that the trustee did something wrong intentionally. It’s that they assumed something was fine without actually testing it.
Related party transactions. Any transaction between the fund and a member, a relative of a member, or an entity associated with a member, needs to be on arm’s length terms and must comply with the superannuation laws. This includes property leased to a business related to the trustee, assets purchased from or sold to related parties, and services provided by related parties to the fund. The standard is stricter than most people assume, and the consequences of getting it wrong range from administrative penalties to the transaction being treated as a non-arm’s length income event, which attracts tax at the highest marginal rate.
In-house asset limit. In-house assets, broadly assets leased to or invested in related parties of the fund, must not exceed 5% of the fund’s total assets. This limit is tested at 30 June each year, but it’s worth checking now rather than waiting to discover a breach after the fact. If the limit is breached, a rectification plan is required, and the fund has twelve months to bring the position back within the limit.
Loans and personal use of assets. Loans from an SMSF to a member or a member’s relative are prohibited, full stop. So is the personal use of fund assets, including artwork, jewellery, collectables, and vehicles, unless the asset is properly stored and the use complies with the strict conditions that apply to those asset classes. These are the breaches that recur most regularly in ATO enforcement activity, largely because they tend to seem harmless at the time and only surface later.
Sequence the year correctly.
The final area I want to cover is something that gets less attention than it deserves, which is the order of things. In super, the sequence of contributions, notices, and pension commencements matters, and getting it wrong can produce a tax outcome that was entirely avoidable.
The practical example that comes up most often is the interplay between contributions and pension commencement. If you want to contribute and then commence a pension in the same year, the contribution generally needs to be made and the relevant notices lodged before the pension commences. Reversing the order, commencing a pension and then contributing on top of it, can create complications that wouldn’t have arisen if the steps had been taken in the right sequence.
Similarly, if you’re planning to claim a deduction for a personal concessional contribution, the notice of intent needs to be lodged with the fund before certain other events occur, including commencing a pension from the account, rolling the account over, or lodging your tax return. Waiting until you’re preparing your tax return to think about the notice is often too late.
My suggestion is to open the year with a clear plan: know your contribution amounts, your pension minimums, and the order in which each step needs to happen. A simple quarterly check-in across the year, looking at where positions sit relative to caps and minimums, keeps everything on track without requiring a major effort at any single point.
The conversation that follows the webinar.
Every one of the seven areas I’ve covered today is genuinely specific to each fund and each trustee. The right contribution strategy depends on your balance, your income, and your retirement timeline. The right pension drawdown depends on your age and your account balance on 1 July. Whether an LRBA still fits your plan depends on what you were trying to achieve with it.
This is exactly why we run these webinars as a starting point rather than a substitute for advice. If any of the seven areas resonated as something that applies to your situation, that’s a signal worth following up on, and the right place to do that is in a conversation with us rather than in a decision made off the back of a webinar slide.
Further Reading
If any of the seven areas covered in this webinar prompted a closer look at your fund’s position, these guides go deeper on the specifics:
What Every SMSF Trustee Should Be Doing Before 30 June, and Throughout the Year covers the full year-round compliance obligations in detail, from contribution caps and pension minimums to investment strategy, insurance, and LRBA requirements.
What to Give Your Accountant for Your SMSF Tax Return is the complete document checklist for trustees preparing for their annual audit and return, covering bank records, valuations, pension documentation, trustee minutes, and everything the auditor will ask for.
Division 296 Super Tax explains the proposed tax on balances above $3 million, what’s been legislated, what’s still pending, and the planning implications for affected members.
If you’d like to talk through what any of these mean for your specific fund, reach out to the Prime Partners team and we’ll set up a time one of our SMSF specialists.