When preparing a set of SMSF annual Financial Statements, a Member Statement is generally included for each Member account.
Advantages to having a concise and comprehensive Member Statement
Our understanding is that it is not legally required for set of SMSF Financial Statements to include a Member Statement. However, Member Statements are usually prepared as part of the Financial Statements for the purpose of keeping track of the taxable and tax free components in their respective accounts as each component is taxed differently. The reasons for doing so are noted below:
- If a Member chooses to start a Transition to Retirement pension, they will need to include the taxable component of the pension received from the SMSF in their personal assessable income. The tax free components, however, will not be taxed at the Member’s personal tax rate. In this case, having a clearly defined taxable and tax free components in the Member Statements can assist with this process.
- Upon the death of the Member, the benefits will be paid to their respective Death Benefit Nominees. In this case, the taxable components received by the nominees will be taxed in their personal capacity and the tax free component will not be taxed. If the Member, before death withdraws a lump sum consisting of both tax free and taxable components and subsequently puts the amount back into the SMSF as a non-concessional contribution, the entire amount contributed will be treated as tax free.
Components of a Member Statement
Generally, a comprehensive and detailed Member Statement should contain the following:
- Member name and the nature of the Member account (pension or accumulation)
- Opening Member account balance at the start of the financial year
- Closing Member account balance at the end of the financial year (this amount should agree with the Balance Sheet)
- Taxable and Tax Free components
- Any employer contributions or personal concessional and non-concessional contributions
- Share of net income or loss for the financial year
- Total pensions paid (if applicable)
- Rollovers received (if applicable)
For a sample of a Member Statement, please click on the button below:
Most accounting software such as BGL Desktop and BGL 360 generates the Member Statements which are generally included in the SMSF annual Financial Statements. However, if Trustee prefers to do their own accounting, it is still good practice to include a Member Statement in the Financials. If you are one of our accounting clients, do not worry as we got this covered.
If a Fund has more than one Member with a Member balance, the income received by the Fund will need to be allocated according to each Member’s interest in the Fund. There is no legislative or legal requirements on how the income is to be allocated as long as the approach is fair and reasonable. For more information on the allocation of income, please click on the link below: