By Tim Miller
(Miller Super Solutions)
With a growing number of SMSF members retired and receiving a pension there is always going to be a significant number of SMSF Trustees/members travelling at any given time, both domestically and internationally.
Whilst I have looked at the definition of an Australian Superannuation Fund in the article “Travelling & SMSFs – staying compliant” (click here to read), what other issues must SMSF trustees take into consideration if they plan on travelling both here and abroad, particularly once they retire.
International & Domestic Travel – Administrative concerns
Whilst overseas travel can present difficulty with the Trusteeship of an SMSF with regards to satisfying the central management and control test however, local extended travel can also carry with it administrative issues that need to be addressed, these also apply to trustees overseas on a temporary basis.
The Trustees of an SMSF are responsible for the activity of their Fund and have an annual obligation to reconcile the Fund’s activities for a financial year and lodge the necessary Tax and Regulatory return with the ATO. Most SMSF Trustees outsource the administration of their Fund to a specialist SMSF Administrator or to their Accountant. This is useful if all the Fund’s activities are sent directly to the administrator but data collection is only one step in annual reconciliation. There are likely to be unreconciled transactions and confirmation of pensions or possibly contributions for the year. This requires communication between the Trustee and the Administrator and whilst much of the information can be determined via various means of communication there may be some items that can’t be reconciled as the Trustees won’t have all their information with them on their travels. Communication may also be difficult or intermittent.
Preplanning can obviously assist with this, such as reconciling with your Administrator before your travel but sometimes this will not be possible depending on the time of the year Trustees travel versus the lodgement requirements of a Fund.
Having an understanding of the lodgement requirements for a Fund are a must, so it is important if the Trustees intend on travelling that they provide appropriate forwarding details to their Administrator as they will be required to sign and return their Fund’s financial statements and annual return prior to lodgement. An allowance of time is necessary if they are overseas or in a remote location.
Delegating powers – other people to sign
One area that often occurs as a result of Trustees travelling is that other parties sign the SMSF Financial Statements under the misunderstanding that because they have a general power of attorney or even an enduring power of attorney that they can sign on that persons behalf. This is not the case and the law is specific about how many trustees must sign the financial statements, in the event of a two trustee Fund both trustees must sign. It is only in the event that a trustee has been removed and replaced by their legal personal representative who holds and enduring power of attorney that this option is acceptable.
Paying your pension on time
A Fund that pays a pension must pay the annual minimum by 30 June each year for the Fund to be eligible for a tax exemption. If the Trustees have not set-up and maintained regular periodic payments to meet the pension requirements or don’t have access to internet banking they run the risk of their pension ceasing (TR 2013/5) and the loss of the exempt pension income deduction. If internet banking is not available in the immediate short term, the trustees may be able to utilise a cheque or promissory note payment prior to 30 June as long as the cheque is banked or promissory note called upon within a few business days.
The Trustee of a SMSF can outsource almost all aspects of their Fund with the exception of their responsibilities. One of the non-legislative aspects of SMSF Trustees travelling is that its purpose often includes relaxation, enjoyment, exploration and there is always the possibility that this will lead to an oversight of the ever present responsibility that goes with being the Trustee of a SMSF. Administrative oversights, non-payment, non-lodgement could all be inadvertent but that doesn’t remove or reduce the responsibility.
It is therefore important that whatever the purpose for trustees travelling, they understand their obligations and fulfill them or make the necessary arrangements to have them met.
General advice warning:
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
Miller Super Solutions is the SMSF education & training creation of Tim Miller, assisting SMSF professionals and trustees with the practices associated with establishing, running and ultimately closing down SMSF’s.