SMSF illegal use of funds paying accountant

[redsquash]

I paid my accounting fees for my SMSF with my personal credit card
then later realized I should have paid from funds in my super account.

Can I withdraw the funds in the smsf , get the cash ,and then deposit funds into my personal credit card?

I am a little concerned I may be doing something illegal with regards to contaminating the money.

My accountant wont be back until mid January so I cant speak to him until then.

 

[marg4000]

Don't do anything without expert advice, otherwise you risk making your SMSF non compliant.
Marg

 

[Ausprop]

should be fine, it's when the ledger is the reverse that it's a problem

 

[geoffw]

I once accidentally made a payment out of my SMSF for private purposes. I was told by my accountant that they do recognise that mistakes can be made, and that as long as I corrected it quickly it shouldn't be a problem.

Naturally seek your own advice- your circumstances may be different. But it may well be ok.

 

[coastymike]

SMSF 2008/2 says at paragraph 131 and 132 (see attached)

 

[Redwood]

I paid my accounting fees for my SMSF with my personal credit card
then later realized I should have paid from funds in my super account.

Can I withdraw the funds in the smsf , get the cash ,and then deposit funds into my personal credit card?

I am a little concerned I may be doing something illegal with regards to contaminating the money.

My accountant wont be back until mid January so I cant speak to him until then.

Have you paid an annual fee or monthly fee? i.e an annual fee could be $1000-3000 v $100-300 for a monthly fee. Given time of the year assume it is annual.

If you have paid for administration of the SMSF from a personal account you can indeed re-imburse from the fund for the amount paid (only for admin fees no other expenses).

Funnily enough, this occurs on a regular basis.

To be conservative, add a file note, detailing the issue and the course of action with dates detailed (i.e remediated immediately) and have the members sign and submit to accountant for next years audit.

 

[Property Hoarde]

If it has been a short period of time (normal trade debtor, trade creditor time frames) for the reimbursement just pay out the accounting fees from the fund to yourself. If it is a longer time frame especially over difference financial years. I would consider calling it a contribution and be done with it.

To be conservative, add a file note, detailing the issue and the course of action with dates detailed (i.e remediated immediately) and have the members sign and submit to accountant for next years audit.

I would not be doing this it just opens up questions. The auditor might just write a Section 129 notice or add a comment in the management letter to cover them selves because of the note, when it is not need.

The auditor will just confirm the accounting fees agree to an invoice and that it should be an expense of the fund, if the time frame from billing to payment are reasonable, they are not going to ask any other questions, so do not confuse it with a note in the file.

 

[Redwood]

If it has been a short period of time (normal trade debtor, trade creditor time frames) for the reimbursement just pay out the accounting fees from the fund to yourself. If it is a longer time frame especially over difference financial years. I would consider calling it a contribution and be done with it.



I would not be doing this it just opens up questions. The auditor might just write a Section 129 notice or add a comment in the management letter to cover them selves because of the note, when it is not need.

The auditor will just confirm the accounting fees agree to an invoice and that it should be an expense of the fund, if the time frame from billing to payment are reasonable, they are not going to ask any other questions, so do not confuse it with a note in the file.

Hi PH, thanks for your comment which is valid.

As an ASIC Registered Auditor the above course of action is what I recommend when a client comes to me with the query. This has occurred on many instances and I have checked previously with other auditors to ensure this is reasonable. If the auditor is not aware of the issue your course of action is prudent also.

 

[Property Hoarde]

If the auditor is not aware of the issue your course of action is prudent also.

The auditor will not notice if there is not a note and as it is not an issue I would not be making it one.

Just for context, I am also an SMSF Auditor registered with ASIC. I own and run a firm which specialises in SMSF Audits.

 

[jorgon]

redsquash there is no need to worry

SMSF expenses can be paid as follows:-

1. By the SMSF itself directly.

2. By someone else (including a member/trustee) where the intention is that the SMSF will reimburse that person immediately, and this happens. This works because the SMSF is not borrowing money in this instance (which is prohibited except in special circumstances) - see SMSF Tax Ruling 2009/2 paragraphs 70 and 71. That is the example of Gary and Sonia who are trustees of the SMSF. Gary pays an expense of the fund and is immediately reimbursed - no borrowing occurred because there was no temporary transfer of money from Gary to the fund.

3. By a member/trustee where the intention is that the SMSF will not reimburse that person. In this case there is no borrowing because there is no intention to repay. However, the fund now has more money than it otherwise would have had, therefore in a case where the member/trustee intends to benefit one or more of the members of the fund by paying the expense (which would usually be the case), then this is a contribution to the fund and should be shown in the accounts as such - see Tax Ruling TR 2010/1, example 1. This should only be done where the member/trustee concerned is able to make such contributions - there would be a problem with this after the age of 65 if not working. Also if the fund is in pension mode, the contribution should be regarded as in a separate contribution account.