By Nicholas Ali
Executive Manager, SMSF Technical Specialist
Every year, more and more Australians are taking control of their retirement nest egg and choosing to set up their own SMSF. However, making sure a fund is compliant with all government legislation and regulations can be extremely complex. A fund that is not compliant could suffer serious negative tax consequences, and the trustees incur heavy fines.
SMSF professional administrators can provide the services to ensure an SMSF is set up correctly; it complies with the regulatory framework and provides the optimal retirement structure for members.
And given the quantum of money involved in this sector, professional administrators will become more important overtime - at 31 December 2021, there were in excess of 600,000 SMSFs, with more than 1.1 million members holding over $840 billion in assets. Therefore, Australians with SMSFs, including intermediaries such as accountants and financial advisers, are increasingly enlisting the help of professional SMSF administration firms who provide varying degrees of specialised SMSF services.
There are some basic functions that service providers may be required to perform, such as the following:
As a minimum, SMSFs need to have a Trust Deed (a legal document that covers how to establish and operate an SMSF), assets, a Trustee Declaration (a statement that shows trustees understand their duties and responsibilities) and registration through the Australian Business Register.
An SMSF must elect to be regulated by the ATO, and must supply each fund member’s Tax File Number (TFN). There are many compliance issues relating to the fund’s investments and the contributions and payments that the fund can receive and make.
There are a number of annual SMSF taxation obligations, including asset valuation requirements, a yearly audit and fund accounts prepared. There are strict lodgment due dates, and trustees, members, and their intermediaries also need to review fund investments regularly to ensure they are meeting the required objectives of member benefits in retirement.
It is crucial to remember that an SMSF must be run for the sole purpose of providing super benefits for its members when they retire. As such, anyone related to an SMSF must not use its assets for current-day benefits.
Investment services can include advice, transaction administration and research. It can be very difficult and time-consuming to run an SMSF without partially outsourcing key administration tasks to professionals.
But good administrators can add far more value than just basic compliance. To truly maximise the benefits of an SMSF, there are a range of enhancements members and trustees should look for in an administration service.
Statutory reporting for legislative purposes – reporting requirements for Transfer Balance Account Reporting (TBAR), Transfer Balance Cap (TBC) tracking, Total Super Balance (TSB) amounts – all these require regular reporting and up-to-date record-keeping. Professional SMSF administrators offer daily reporting services, which facilitate the effectiveness of timely reporting to regulators such as the Australian Taxation Office (ATO) and to trustees and members to ensure the fund complies with the rules.
With the ever-changing nature of superannuation legislation and strategies, it is important the fund’s governing rules, i.e. the Trust Deed is kept up-to-date and allows for the latest strategies and options. Professional administrators often provide a Trust Deed upgrade service that ensures the fund’s governing rules are flexible and allow for the widest range of strategies.
Such data feeds reduce the requirement for trustees to provide paper-based transactions related to the fund. Data-fed options also ensure intermediaries, trustees, and members have up-to-date details regarding the fund’s investment balances and asset allocation – a crucial element to ensure the fund stays within the bounds of its investment strategy.
When commencing a pension, entering a borrowing arrangement or re-structuring the fund on the death of a member, documentation is required to ensure the investment details, features, compliance and estate planning options are understood. Professional administrators provide comprehensive documentation services that enable SMSF members and trustees to access these important documents, ensuring the fund satisfies its legal obligations and members and trustees can update fund details quickly and efficiently.
A significant benefit of professional SMSF administrators with robust software systems. Given the reduced concessional and non-concessional caps and Total Super Balance considerations that restrict members making voluntary contributions to super, it is imperative members, trustees and their advisers/accountants can see the current years’ as well as prior year’s contributions to the fund. Breaching the caps can have adverse tax consequences.
In a similar vein to the importance of tracking contributions, keeping track of pension payments has great importance as not meeting the pension payment standards can mean the income streams cease. This could impact member estate planning strategies, as well as have adverse tax consequences for the fund. Being able to see what payments have been made ensures members meet their requirements during the financial year.
- What are the investment rules?
- What are the contribution rules?
- What are the ramifications of a pension be reversionary?
- How to correct compliance errors or seek a specialist opinion on a complex structural matter?
- What are some of the latest strategies to maximise retirement benefits for members and/or their dependants?
Such technical expertise can also provide training sessions, technical and legislative updates, strategy sessions as well as training for trustees.
Advancements in technology mean many SMSF administrators work on a data-fed basis; the requirement for paper and wet signatures is diminishing. However, hardcopy correspondence will most likely never disappear. Having a central mailbox source increases the likelihood of documentation being retained and acted upon, especially important decisions such as share purchase plans and corporate actions.
In this ever-increasingly complex world, having a professional SMSF administrator can ensure trustees and their advisers and accountants are maximising the opportunities available to them; focusing on the strategies that provide the best retirement options, whilst retaining peace of mind knowing fundamental compliance aspects are being proactively monitored and information provided on a timely basis.
.png?sfvrsn=f5af2bc0_0 "MicrosoftTeams-image (17)")
For fortnightly insights, follow our podcast SMSF Adventures with SuperConcepts hosted by Jessica Griffith as she speaks to some of the greatest minds in the industry, to deliver the information that matters.
Follow the show on Spotify or Apple Podcast.
To learn more about how our range of SMSF services phone us on 1300 023 170 or request a call back.
Alternatively click through to view our range of services for trustees, accountants and advisers.
