Managing SMSF Compliance & Administration

Self Managed Super Funds (SMSFs) are very popular with Australians wanting to take control and manage their own superannuation assets. As is the appeal of the 'do it yourself' factor. Yes, you gain control, however managing a SMSF is a complex as there are a raft of rules and obligations to meet; set out in the Superannuation Industry (Supervision) Act 1993 (SIS Act) as well as by various regulators such as the Australian Taxation Office ( 'ATO') and the Australian Securities and Investments Commission ( 'ASIC').

But don't let this put you off! Get informed and understand what is involved; starting with the tax office website. Do your research and partner with an SMSF specialist to assist you with the reporting, compliance and administration obligations.

With a SMSF Specialist you get what you pay for, so don't just look for the cheapest option. But in saying that, you shouldn't have to pay a fortune for quality assistance. Most importantly, ensure you are completely comfortable in taking on the responsibility of looking after your own super, and be willing to continually spend time staying on top of the ever-changing rules and regulations, as failure to do so can have serious consequences on when, and how much you have to retire on.

Responsibilities

Trustees must have the time and skill to run their fund, or be willing to pay suitable specialists to do this on their behalf. Trustees of an SMSF are personally liable for any decisions made by the fund, even if they engage a third party to assist. It is therefore vital that trustees partner with appropriately experienced and qualified specialists when setting up and managing their SMSF.

There are only very limited scenarios in which you can live outside of Australia and maintain a complying self managed super fund. If a member moves overseas indefinitely or for a prolonged period of time there are restrictions on who can continue contributing to the super fund and the 'central management and control' of the super fund must reside with someone located within Australia. Therefore, an SMSF may not be appropriate for someone who is likely to spend a significant time living overseas.

Given the rise in popularity in self managed superannuation, there are a lot of providers willing to set up, advise and manage an SMSF on the trustee's behalf. Costs can vary significantly and so can the level of service and expertise provided. Even when a third party is engaged to perform functions on behalf of the trustees, ultimately the trustees remain liable for all activities relating to the fund. It is therefore vital for trustees to ensure they are engaging qualified, experienced specialists to assist them. Professionals must be appropriately licenced to provide personalised advice in relation to the establishment of an SMSF. Individuals can check if someone is licenced by asking for their Australian Financial Services Licence (AFSL) number, and the ASIC's adviser register will confirm what that person can advise them on.

SMSF's offer great flexibility, control and transparency over what is most people's second biggest personal asset after their home, their retirement savings. It is important to understand the responsibilities involved and how to obtain appropriate assistance where necessary.

Despite often being referred to as 'DIY Super' – there are many aspects to establishing and running an SMSF that require qualified professional assistance to ensure the rules and regulations that govern the SMSF space are adhered to. Engaging quality experienced third parties is vital as the ultimate responsibility and liability in relation to the fund will always lie with the trustees of the fund. So make sure the advice you rely on is correct!

Reporting requirements

A set of financial statements and tax return is required to be prepared for the Fund, annually. These financial statements are then independently audited (by an auditor who is registered with ASIC) and the tax return lodged with the Tax Office. The Trustees (or an accountant/administrator on their behalf) must make available to the auditor source documents verifying the transactions within the fund and other information where applicable. This is an additional degree of accountability that most other entities are not subject to. Record keeping and documentation retention is of particular importance when managing an SMSF.

If the fund is newly established, its first tax return must be lodged by 28 February following the end of the applicable financial year. Future returns after the first one have a due date of 15 May. If the last return lodged on behalf of the fund was late, the fund must lodge its next return by 31 October.

The tax office levies an annual supervisory charge and the fund is liable to pay tax at a concessional rate of 15% on income and contributions, and 10% on capital gains while it is in accumulation phase.

The ATO is concerned by the number of funds that have outstanding lodgement obligations. So in addition to the 31 October lodgement deadline, they remove the 'regulation details' of a fund's complying status on the ATO's external register of SMSF's, 'Super Fund Lookup'. Without these details employers will not pay super guarantee contributions into the SMSF and other superannuation providers will not rollover funds. Then, once lodgements are brought up to date, it can take up to another month before the regulation details are updated on the register. These actions are a very powerful tool for the Tax Office dealing with Trustees who are not keeping up with their responsibilities.

Administration

One of the key benefits on managing your own SMSF is the control a fund provides in selecting and managing your own investments. However, when it comes to the administration side of things, very few people can really 'do it themselves' due to the complexity of the legislation and the risk if it is not done correctly. Most people require assistance with the administration of their fund.    

H&R Block is a specialist SMSF administration service provider. The tasks we would normally carry out in administering a fund for our clients include:    

• Recording all financial transactions; through a sophisticated SMSF software package called 'Class'

• Maintenance of investment registers

• Benefit payment calculation & documentation

• Pension calculations and benefit payments

• Preparation of annual financial reports, with supporting work-papers

• Preparation of member benefit statements

• Arranging an annual audit of the financial statements and accounts

• Preparation and lodgement of income tax and regulatory returns

• Attending to the ASIC annual company statement and Solvency Declaration, for corporate trustees

With these administration tasks we provide:    

• Electronic services, with web-based access, avoiding the need to bring paperwork to an office or sign documents

• Automatic updates of bank account and investment transactions

• Timely reporting of net value positions on the fund's investments

• Integration with other SMSF and accounting services provided

• No conflict of interests with other roles, including independence between the preparation and auditing the financial accounts

• Transparent, understandable and identifiable fee structures

• Proactive SIS compliance to assist the trustee and members; including monitoring deposits and withdrawals, ensuring proper paper trails and supporting details of transactions, regular investment reporting, monitoring cash flow, ensuring members do not exceed their contribution caps or pension limits, etc

• Expertise and timelines in the preparation of statutory and reporting, including financial statements and lodgement of tax returns

There are many fixed costs that are applicable to an SMSF regardless of its size and performance, therefore as a fund grows in value its costs will generally reduce proportionally (which is different to Industry or Retails Super Funds where costs are usually taken as a percentage of your overall balance). It is important to look at the fees you are paying your current superannuation provider and compare.    

Contact H&R Block SMSF Solutions should you require any assistance in the administration or compliance of your fund.

 Important information