Whereas members of large super funds have experts to get things right, with DIY fund the buck stops with trustees. Photo: Michele Mossop
One of the obligations trustees of do-it-yourself super funds have is to stay informed of what’s changing in super, especially those who signed a declaration that this would be part of the job when they started their fund.
As a current example, knowing what is happening is being aware of a focus on tax deductions that can be claimed by DIY funds.
Deductions in DIY super come in two forms, the first being everyday deductions associated with general fund expenses. On a grander scale is the significant deduction of investment income earned by a fund’s pension assets that can be claimed against its assessable income under the exempt pension income entitlement.
Most DIY fund trustees will know
that the investment income earned by pension assets is tax exempt, although many may not be aware this concession comes in the form of a tax deduction against assessable income.
It’s a deduction that can be totally denied or only partly allowed by the DIY super regulator, the Australian Taxation Office, if the fund hasn’t satisfied the rules that entitle it to the deduction. These include the trustees ensuring all pensions satisfy the annual minimum age-related payment rules and that investment valuation calculations are performed correctly.
Last month the ATO pledged a comprehensive audit of exempt pension income claims over the next year, starting with a survey of 1100 funds.
Getting it right
Given this can be the largest deduction a DIY fund might claim, says Doug McBirnie, a consulting actuary with Bendzulla Actuarial, getting it right is very important as there can be significant tax consequences if it should be denied.