Do You Need An Accountant for SMSF?
No, you do not need an accountant for SMSF.
An SMSF trustee has the ability to manage their SMSF including self preparing the financials and tax returns. The only thing an SMSF is legally required to outsource is the annual audit, which must be performed by an independent ASIC licensed auditor on an annual basis.
A complete ‘DIY’ approach to an SMSF will save the fund the annual cost of an SMSF accountant but will pass a lot of duties onto the trustee including maintaining documentation and meeting the ATO compliant requirements.
On average, Australians spend more than 100 hours a year managing their SMSFs when they choose not to enlist the support of an SMSF Accountant to oversee their fund’s administration and compliance needs.
For trustees who want to DIY they will need to have a good understanding of laws surrounding tax, super and investments in order to maintain compliance. The easiest way to achieve this is to keep investments basic.
SMSFs are strictly regulated by the ATO and should a fund be flagged as ‘non-compliant’, the trustee runs the risk of incurring significant penalties, such as a 45% tax rate on it’s SMSF investment income.
The first step if you are considering a DIY fund is to read the Australian Taxation Offices guide to SMSFs: ATO’s guide to self-managed super funds.
How Do I Start an SMSF?
The first step in setting up an SMSF is deciding on a name for the corporate trustee running the fund, and a name for the fund itself. These don’t need to be the same but you will need to check the ASIC website to ensure your corporate trustee name is unique.
Establishing a corporate trustee is the recommended pathway to starting an SMSF and although it incurs an initial creation fee ($538) its ongoing fees are quite low for companies whose sole purpose is running an SMSF (just $59 per year).
Following establishment of your corporate trustee, you will need to:
- Compile member applications
- Register with the ATO and complete ABN and TFN applications
- Open a bank account for your SMSF
- Apply for an electronic service address (ESA) in order to receive contributions into your fund
An ESA will be provided to you, often free of charge, should you use an SMSF Accounting service like SMSF Australia. If going it alone, the ATO has compiled a list of providers you can register with, however not all of them support rollover transfers of existing funds.
Key Compliance Documents
Running a self-managed super fund affords you the control and flexibility over your financial future and may save your money on annual accounting fees. However, it also leaves you entirely responsible for maintaining the compliance of your fund.
The ATO strongly encourages prospective SMSF trustees to consider professional help due to the number of obligations and legal responsibilities involved in running an SMSF.
Some key documents that are required for running a compliant SMSF include:
- SMSF Deed
- Investment Strategy
- Meeting minutes and trustee declarations
- Financial statements
SMSF Deed
The SMSF Trust Deed is a legal document that outlines the administration of the fund and how it adheres to the requirements set out by the SIS Act and Regulations. This document must be reviewed by a legal professional with experience in the SMSF fiend to ensure that it is in-date and accurate. SMSF Australia has a specialist SMSF Lawyer on staff, and the review and creation of an SMSF is included in our SMSF Set Up and SMSF Accounting services.
Investment Strategy
All SMSF must have a document justifying the investment choices made by the fund. It is not just a repetition of the legal requirements of the SMSF, but a tailored strategy that aligns with the retirement goals of each member. Existence of an accurate investment strategy is required to meet SMSF compliance, and this will be reviewed during your audit.
Meeting Minutes and Trustee Declarations
DIY SMSF administrators will also need to keep minutes of all meetings held between fund members, particularly for the initial establishment of the SMSF, as well as those where key investment decisions regarding the fund and its future are made.
Financial Statements
Trustees are responsible for preparing the financial statements for the SMSF at the end of the financial year to ascertain its financial position and the market value of the fund’s assets.
SMSF Trustees who maintain a DIY approach are responsible for preparing these for audit, as well as compiling bank account statements and records of each member’s account, plus records of all contributions, rollovers and payments to and from the fund.
SMSF Tax Return and Annual Audit
Self-managed super funds are tax paying entities and as such are required to complete an annual tax return. Failure to accurately complete your SMSF tax return before the deadlines (Feb 28th for new funds; May 15th for other standard funds) can see compliance status revoked by the ATO, leaving you liable for financial penalties.
Prior to completing a tax return for your SMSF, your fund must undergo a mandatory audit, the cost of which varies depending on fund complexity, type of investments and what software is being used to prepare the fund.
Should you be manually preparing your SMSF for audit using spreadsheets or a non-cloud-based platform, this will result in higher fees due to the added time associated with such a process. For a more comprehensive look at what is involved in an SMSF audit and the files that are required to be prepared, please look at our SMSF Audit page.
Choosing to run your self-managed super fund without the assistance of an SMSF professional is a huge undertaking that can have significant financial ramifications due to error or oversight on behalf of its trustees.
While you can save some money by handling all administration and compliance yourself, there are some inescapable costs associated with all SMSF such as establishment and audit fees.
Are you looking for accounting assistance for your SMSF?
Give us a call on 1300 392 544 or get in touch online.
