Do Your SMSFs Have an Accountant?

More people prefer self-managed super funds (SMSFs) when saving for retirement because of the control it gives you when it comes to your investment decisions. But with this great amount of control arises the duty to comply with the super and tax laws.

SMSF accountants have been around for many years to provide compliance services and advice to fund trustees. Their extensive knowledge and experience help you establish your fund and take care of accounting, administration, and audit requirements.

However, a recent survey has found out that a third of SMSFs that do not receive services from accountants are deemed non-compliant.

Speaking at the Chartered Accountants Australia and New Zealand conference last month, Investment Trends research analyst Recep III Peker said accountants are finding a large number of inconsistencies within the SMSFs of new clients.

“We asked accountants of the new SMSF clients they’ve had in the past 12 months how many were compliant in relation to regulations and requirements and the average accountant said only 68 per cent were compliant,” he said. This made him realise that a third of the SMSFs that do not have accounting relationships are making significant compliance mistakes.

Peker added that the main contraventions include issues related to administration, failure to document the investment policy, general report keeping, and in-house assets.

Dealing with Non-Compliance

The Australian Taxation Office, the regulator of SMSFs, aims primarily to encourage fund trustees to comply with the super laws. However, in the event of non-compliance, stronger measures are authorised. Decisions are made according to the statements and principles set out in the taxpayers’ charter, compliance model, and good decision-making model.

Depending on the circumstances and gravity of the contravention, the following treatments are imposed when dealing with non-compliant SMSF trustees:

  • Education direction
  • Enforceable undertaking
  • Rectification direction
  • Administrative penalties
  • Disqualification of a trustee
  • Civil and criminal penalties
  • Allowing the SMSF to wind up
  • Notice of non-compliance
  • Freezing an SMSF’s assets
Importance of Referral

Peker said that while advice from an accountant still rated second as a reason for setting up an SMSF, it had fallen since the last survey. According to him, in the 1990s, around 60% said they set up an SMSF because their accountant told them to do so. Now, only about 16% of those who set up an SMSF between 2012 and 2014 did so because of their accountant’s advice.

On the other hand, 24% of those who intend to set up an SMSF in the future claimed that they were influenced by a friend. He said, “It’s really important for you to encourage your existing clients to get their friends to go to you when they decide they want to set up an SMSF.”

The research also showed that the number of SMSF set up by accountants has fallen by more than 20 percent in the last two years as more funds are being set up by financial planners and SMSF administrators. Peker revealed the most commonly reported reasons for using SMSF administrators was ease of use, lower cost and outsourced administration service with about 150,000 SMSFs currently using administration services.

According to Peker, those who intend to set up an SMSF stated that their main reasons were control and lower costs followed by looking to invest in property or to borrow and gear within their superannuation fund. “The top [financial services] areas people are willing to pay for are all around retirement: if you look at the biggest cluster it tends to be around the age pension and estate planning and succession planning. It’s a huge area of unmet advice, it’s a huge opportunity,” he added.

Let your SMSF accountant help you get organised and stay on top of your obligations in order to take advantage of the efficiency, be updated with law changes, and ensure your compliance to SMSF regulations.

The Outsourced Accountant  supports Australian and New Zealand accounting firms by helping them understand and implement outsourcing solutions to help them become more proactive and truly add value to their clients. If you want to know more about outsourcing, call us at 1300 896 522/0800 452 853, and download our e-book.