How to accrue SMSF Supervisory Levy in SF360?

I think I have been incorrectly advised to journal:

30/06/2021:
88000 Sundry Creditors 259.00
30400 ATO Supervisory Levy 259.00

11/11/2021:
60400 Bank 259.00
85000 Income Tax Payable/Refundable (Leaving Levy blank) 259.00

That is wrong because Sundry Creditors is not ‘Cleared Out’.

I think the correct way is to:

  • NOT post (or delete) the 30/06/2021 journal transaction, and,
  • only post (or amend) the 11/11/2021 bank transaction, and,
  • click the 85000 [MORE] button

SF360 will then post 259 to Levy expense account for tax year 2020-21.
The ‘Accrual / Un-Accrual’ is made obsolete by SF360 ‘automation’.

Is that correct?

Is reversing entries, reopening previous year, reversing entries deleting and amending the transactions, create entries, closing year, creating entries the correct method?

According to the ATO, you’re not suppose to accrue the levy, and you only take it up in the year that the tax has been paid - which really screws up our comparatives in the financials.

If a tax refund or payment has not occurred within the financial year, I normally record the entire tax payable/refundable amount into Sundry Debtors/Creditors.

DR or CR 85000
DR or CR 68000/88000
and click the appropriate levy amount in the more details section.

That’s the best way that I have found to be effective.

1 Like

Thanks JYSuper.

Mangirish Prabhu (Simple Fund 360) said: The 30/06/YYYY 30400 Levy transactions are not required and must not be posted.

He wrote: The Levy is to be included in the tax paid (refunded) transaction as per:

I’ll presume that reopening and reversing entries to get to the transactions to be deleted or amended will not cause problems.

Dudley.

I never accrue it, it isn’t payable until the return is lodged. If it’s been accrued in the past then yes you will have one year that doesn’t look comparable but I think that is better than continuing the wrong practice.

The actual instance:

Tax 2020-2021 :
. Tax payable $59.72,
. PAYG Instalments $-375.00,
. Tax (Refunded) / Paid $-315.28,
. SMSF Levy $259.00,
. Total paid (refunded) $-56.28

What I did:

30/06/2021:

88000 Sundry Creditors 					Cr 259.00
30400 ATO Supervisory Levy 		Dr 259.00

11/11/2021

60400 Bank						Dr 56.28
85000 (Income Tax Payable/Refundable)	Cr 315.28 [MORE [tax year]]
88000 (Sundry Creditors)		Dr 259.00

It is not clear to me what ATO expects; accrue Levy / not accrue Levy.

Accountancy, auditor, actuary and other expenses to be accrued / not accrued?

ATO does expect dividends to be accrued.

Seems like ‘whatever’.

So I accrued Accountancy and Levy because that is what the auditor wants, accrued dividends because that’s what ATO wants and did not accrue other expenses because I had no compelling reason to do so.

Consistency is the main consideration?

SMSF is normally operated on a cash cash basis but for me the only thing that I do not accrue is dividends and contributions.

Never really seen consistency, everyone has a different way of doing things - especially non SMSF Accountants doing SMSF work.

Anything Goes eh JYSuper?

From a Super specialist:

(‘For 20 years we have been at the forefront of providing SMSF solutions and today we are one of Australia’s largest independent SMSF service providers.’)

“There are two methods of accounting for income for tax purposes: the cash basis or the accruals basis.”

The Heffron choice seems predicated on “the current ECPI regime

ATO have not objected to distribution accruals in my accounts, and, presumably, not objected to non-accrual of distributions in yours.

If ATO don’t routinely object to one or the other, then, perhaps, they only object when there a tax audit of the audited accounts?

Some clarification from auditor:

  • Dividends received for directly held shares are classified as cash and MUST NOT be accrued.

  • Distributions received for directly held units in trusts MUST be accrued.

What about a fund which pays franked dividends? Example ASX HBRD.

Judging from your comments, I assume you are quite new to the game.

Franked dividends are normally paid from ordinary shares, they have 3 letter ASX codes.

BetaShares Active Australian Hybrids Fund (HBRD) is an example of a Exchange Traded Fund (ETF) - which uses a unit trust tax structure that pays distributions - The Comprehensive Guide to Understanding Exchange Traded Funds |

You would record them as a Units in Listed Unit Trusts (Australian) in SF360.

New to SF360 which has resulted in re-visiting some assumptions.

Thanks.

My auditor emphasised that both share dividends and associated franking credits are accounted at the date received.

Auditor also mentioned that I correctly accrued distributions received from trusts and associated franking credits through:
. [30/06/2021 Cr 23800 Distributions Received / Dr 61800 Distributions Receivable];
. [01/07/2021 Cr 61800 Distributions Receivable / Dr 60400 Bank
and found that SF360 handled the 30/06/yyyy AMMA / AMIT data correctly through Compliance > Distribution Tax Automation.

Would be nice if ATO was clear on accounting standards as my auditor mentioned exceptions due to company specific rulings.

I think Simple Fund 360 is getting close to perfecting the process of recording distribution tax statement data - it will be great if everyone issued their annual distribution tax statements using a single standardised format.

CR 23800/ Distributions Received
Dr 61800/ Distributions Receivable
This is the Basics 101 on recording distributions - you won’t have any disputes/disagreements with any Accountant about this.

I think the ATO have been going down lately, lacking skilled staff.

1 Like

Not lately, since about the time the latest Commissioner was appointed back in 2013. :wink:

The Super Levy (currently $259) is known well in advance of the end of the financial year, it is printed in bold in the pdf ‘paper’ form.

It is not paid until after the end of the Financial Year to which is belongs.

It is a deduction which must be accounted for in the year to which it belongs to ensure that the tax owing calculation is correct and the members balances are correct.

For the first year of a super fund the Super Levy must be introduced into the accounts yet at the end of the first year it has not been paid.

The only way of introducing the Super Levy into the account for the first year is by accrual.

Then each subsequent year the Super Levy must be accrued also.

For Auditors Fees it is possible to pay the auditor in advance and account the fees as cash.

The Super Levy can not be paid in advance so must always be accrued to ensure it is accounted in the correct year.

BGL have previously received the following confirmation from the ATO:

· The levy is still deductible.

· The deduction applies for the financial year it is paid.

https://sf360.zendesk.com/hc/en-au/articles/360018424191-Supervisory-Levy-Prior-Years-Under-Over-Provision

Thanks, but still ambiguous:
. FY in which it is paid, or
. FY for which it is paid?

The accompanying table is also ambiguous.
“SMSF Annual Return 2016, Levy $259, Year of Levy 2017 only” does not specify in which year the Levy is to be accounted.

I could read that as “Year of Levy 2017” being FY in which paid, FY 2016 being the year in which the Levy, paid in FY 2017, is accounted.

The table being about “bringing forward” the Levy by one year, the FY 2017 fee being accounted in FY2016.

I’m loath to ask ATO as I might obtain a random response.

Deductible WHEN it is paid.

There are unfortunately cases where people are many years behind in lodgement and payment. It is only deductible when it is paid.

https://www.legislation.gov.au/Details/F2013L00988

The legislation amendment makes it clear it’s not accrued…
5(2) The levy for a year of income is due and payable on the return lodgement day for the preceding year of income.

Wow, an Auditor demanding that it gets accrued. I know that most auditors will turn a blind eye to people still accruing but to insist that it is accrued indicates his/her knowledge is out of date.

Thanks for the reply.

The linked document: Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Amendment Regulation 2013 (No. 1)
reads:

  • “No longer in force”
  • Date of repeal 02 Jul 2013

The BGL document: https://sf360.zendesk.com/hc/en-au/articles/360018424191-Supervisory-Levy-Prior-Years-Under-Over-Provision
states:
The payment of the SMSF levy will be brought forward so it is levied and collected in the same financial year.
and has a table showing:

SMSF Year
Annual Of
Return Levy

2012 2012
2016 2017

The Super Levy is a tax which affects the tax payable for the year for which it is paid.

Earnings after deductions and tax, including Super Levy, are allocated to members.

I have taken that to mean that taxes, including Super Levy, for FYxxxx are subtracted from the earnings of FYxxxx and the net earnings of FYxxxx are allocated to the member’s balances.

Thus Super Levy for FYxxxx, paid in FYxxxx+1, must be accrued to FYxxxx so that the correct tax and members balances for FYxxxx are calculated?

Where the Super Levy for FYxxxx and FYxxxx+1 are the same quantity then it matters not.

But where they are different or the fund is new, having not paid Super Levy in FYxxxx-1, not accruing produces an incorrect result.