Understanding the SMSF Financials: 3 key things to remember

Insights for Individuals

Members, Tax, Assets – huh?

For many, understanding superannuation financials, member statements and different accounting policies is a complication you would rather avoid.

Superannuation remains one of the most complex structures to understand, combining tax, trust and often company laws to consider.

Katie summarises her 3 key takeaways to help you further understand the complexities of superannuation in family law matters.


1.  ValuationsKatie summarises her 3 key takeaways to help you further understand the complexities of superannuation in family law matters.

While all assets in an SMSF have to be reported at market value, determining what market value means can vary widely.

Often there are timing issues, and assets that don’t have a readily available market can be valued in different ways.

Property is often reported at prices that are well over 12 months old. Unlisted trusts may be valued based on net assets, without the assets themselves being on the market.

Sometimes there are multiple valuation options that give vastly different results.

If there are disputes or asset values that can vary, having an understanding of the options and reaching an agreement early can mean a much smoother process.

Katie’s Tips:

  • Engage the SMSF accountant early
  • Make sure you are relying on current financial statements
  • Understand how the value has been derived!

2. Accounting Policy

Possibly the last thing anyone wants to understand is the accounting policy that has been used in pAdvice for family lawyersreparing the SMSF financials.

There is one key thing to look out for, deferred tax policy. The deferred tax liability considers what potential capital gains an SMSF would pay if all assets were sold on that day.

If an SMSF has not included a deferred tax liability, the member balances may be overstated if a share sale happens and the capital gains tax hasn’t been considered.

By contrast, including a deferred tax asset may be overstating the fund assets, as this reports unrealised losses that may never be received as income.

Katie’s Tips:

  • Engage the SMSF Accountant early
  • Look for the words ‘Deferred Tax Liability or Deferred Tax Asset’ on the Balance Sheet
  • Ask why, or why not!

3. Capital Gains Tax ReliefFamily law and capital gains tax relief

While CGT relief can be a powerful tool to allow assets to be transferred without incurring taxes, it's important that the relief is understood by both parties.

Inheriting a lower cost base or just deferring a gain to the future may lead to outcomes that are not quite as positive.

Understanding the opportunities that exist for different members in different circumstances can really add value to your clients.

Sometimes, if it is possible, an amicable division can provide wins for both sides – especially where there are pensions involved.

Katie’s Tips:

  • Engage the SMSF Accountant early
  • Engage the financial adviser early

For more information

Whatever situation you and your client are facing, the team at RSM have dedicated Family Law specialists on hand to guide you, ensuring you achieve the best possible outcomes for your clients.

RSM Australia recently hosted a webinar on "Understanding Superannuation Financials" presented by Katie Timms. If you would like to view the recording, click here.