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Running a self-managed super fund (SMSF) sounds simple enough on paper. You must stay compliant, keep the money growing, and follow the rules. But anyone who has actually managed one knows how SMSFs come with layers of reporting, documentation, and regulatory obligations that can get messy fast.
A small slip in record-keeping or a misinterpretation of a regulation can result in penalties, delays, or even compliance breaches. But fortunately, most SMSF mistakes are predictable and preventable.
Let’s discuss five of the most common traps trustees fall into, so you can avoid them.
1. Mixing Personal and SMSF Expenses
This one seems obvious, but it is still the number one compliance issue. An SMSF is a separate entity legally, financially, and structurally. The moment you use fund money for anything personal, even by accident, you risk breaching the sole purpose test.
Examples of common mix-ups include paying insurance premiums from the wrong account, buying assets in a trustee’s personal name instead of the fund’s, and using SMSF funds to cover short-term personal expenses.
These errors leave a paper trail that auditors can’t ignore. Regular reconciliation by a professional offering SMSF accounting services keeps errors from piling up.
2. Not Understanding Contribution Caps
Contribution caps change often, and missing even one update can create tax issues. Many trustees unintentionally exceed the caps because they don’t realise that employer contributions count toward the total or that personal contributions push the fund above the limit.
Exceeding the cap can result in tax penalties. Track contributions throughout the year instead of waiting until tax time. An accountant can help you keep a running total so you know exactly where you stand before the financial year ends.
3. Poor or Incomplete Record Keeping
SMSFs require meticulous documentation. Missing even one essential document can delay your annual audit or trigger compliance issues. Many trustees underestimate how much paperwork is needed, or they keep everything scattered across emails, desktop folders, and paper files.
To avoid this mistake, create a consistent system. Whether digital or physical, all fund documents should be stored in one place and updated regularly. A professional accountant can help maintain a clean audit trail.
4. Incorrect Valuation of SMSF Assets
The ATO (Australian Taxation Office) requires assets to be valued at market value every financial year. It’s easy for cash or listed securities, but not so straightforward for investment property, private company shares, or unlisted investments.
It’s best to use independent, verifiable valuations. For property, it may mean getting a professional appraisal every few years. For other assets, documentation must be objective and clearly justifiable. Again, an SMSF accountant can guide you here.
5. Missing Lodgment Deadlines
Falling behind on reporting deadlines can result in penalties. It often happens when trustees don’t have all documents ready for audit, leave accounting tasks until the last minute, or miscalculate tax responsibilities.
Once a fund’s status is affected, fixing it becomes more complicated. Consider building a simple calendar of key dates and working with professionals to keep everything on track.