In this blog we will walk you through various elements crucial for accounting and tax reporting in SMSF (self-managed super funds) and decipher the perks of SMSF outsourcing.

Accounting and Tax-reporting: Crux of SMSF management

Error-free tax reporting and accounting are the foundation for efficient financial management and aid adherence to legal compliances. Below are other advantages of accurate tax reporting and accounting.

• Likelihood of availing suitable tax benefits for SMSF.
• Maintaining regulatory compliance.
• Sustaining financial integrity by organising financial data.
• Equipping accurate submission of annual audits.
• Facilitating strategic planning in business.

For the fund to profit from the above benefits, it has to be evaluated by the regulatory authority for compliance. Consecutively, we will see the specifics of governing bodies and super laws laid by the government in managing SMSF.

The law enforcer & their Significance in SMSF

The Regulatory authority and the compliance laws associated with SMSF accounting & tax reporting

There are two crucial bodies governing SMSF accounting and tax reporting. They are:

1. Australian Tax Office (ATO)- Administers relevant super laws for SMSFs
2. Australian Securities and Investment Commission (ASIC) - Regulates financial services to protect consumers and manages SMSF auditor registrations.

The Superannuation Industry Supervision Act 1993(SIS) has established rules and regulations for managing SMSF. It is a legislative framework that lays out requirements for superannuation funds.

SIS Act and Supervision Industry regulations are jointly known as “Super laws.”

SMSF (Self-managed super funds) should abide by the laws and maintain vast documents that align with regulatory bodies.

A Focus on Paperwork

Documents to be prepared and retained for 5 years:

• Documentation showing decisions about what benefit payment type was paid (pension, lump sum or a combination).
• An annual operating statement and an annual statement of SMSF’s financial position.
• Copies of all SMSF annual returns lodged.
• Copies of the transfer balance account reports lodged.
• Copies of any other statements that are required to be lodged.

Documents to be prepared and retained for 10 years:

• Minutes of trustee meetings and decisions.
• Records of all changes of trustees.
• Trustee declarations recognising the obligations and responsibilities of any trustee or a director of a corporate trustee appointed after 2007.
• Each member’s written consent to be appointed as trustees.
• Copies of all reports given to members.
• Documented decisions about the storage of collectables and personal use assets.

In addition to complex documentation procedures, other complexities in the Accounting and tax-reporting process are discussed below.

Fundamental Complexities in Accounting & Tax-reporting: In-depth view

• Maintenance of financial data

Financial data comprises an SMSF fund’s Balance sheet, income statement and cash flow statement. Managing the financial data begins with recording all transactions, including contributions, rollovers, income, expenses and withdrawals.

The next step involves reconciling bank statements and transactions to verify discrepancies and errors. While reconciling, issues like unrecorded dividends or any other discrepancies should be assessed.

Once the financial values are recorded, a complete set of financial statements should be arranged, including a balance sheet, income statement, and cash flow statement. These financial statements should align with the Superannuation Industry (Supervision) Act 1993 (SIS Act) and Australian Tax Office (ATO) requirements.

If tax lodgments are not submitted on time, it will lead to fines and additional interest charges, ultimately leading to operational disruptions in SMSF management.

• Extensive documentation

We understood the vast documents required for 5 years and 10 years. These documents include all transactions, investment decisions, financial statements and tax returns.

These mandatory documents should comply with both ATO guidelines and annual audits. This pressure can lead to an administrative burden for the one managing SMSF.

• Demands substantial time

Aligning with compliance, bookkeeping, and documentation are major zones that consume a long time. While managing SMSF, the fund has to comply with laws, including the Superannuation Industry Act. (SIS), tax laws and ATO guidelines.

If the fund is non-compliant, it can attract penalties, including potential loss of tax concessions and even be deemed non-compliant, which carries a tax rate of 47%.

• Technological complexity

To manage proper documentation, one needs to have technological expertise. Accounting software is used to organise and store documents. However, the user should be proficient in the latest technology for deploying specific tools.

As technology evolves, the user must also be up to date with them.

Minimising all the above drawbacks while documenting and reporting is necessary for efficient fund management. Now, let’s probe into the best practices that outsourcing accounting and tax-reporting services can yield.

Outsourcing of SMSF accounting and tax-reporting activities is the key.

SMSF ACCOUNTING: MERITS OF OUTSOURCING FOR GUARANTEED BEST PRACTICES

In the case of Managing SMSF accounting and tax reporting, it’s essential to consult an entity capable of advocating the best practices that will facilitate improved operational efficiency in accounting and accurate compliance outcomes in the case of tax reporting. In brief, outsourced SMSF services will lead to efficient operations, improved compliance and seamless experience.

Below are the benefits of outsourcing accounting and tax reporting.

• Industry expertise: When SMSF accounting is outsourced to the correct entity, it is under the expert hands. The client can skip the pressure and strain of complex superannuation laws and regulations.
• Maintenance of Accurate records: Financial statements and documents should be accurate. It is vital for following financial integrity, risk management, tax reporting, and gaining member confidence, ultimately leading to efficient fund management.
• Regular reconciliation: Regular reconciliation is carried out frequently to address record discrepancies promptly.
• Distinctive fund transactions: Outsourcing helps maintain separate personal and fund transactions. This reduces compliance risk and enhances the accounting process's trust and integrity.
• Annual assessments: All the statements and records are maintained and assessed annually to monitor the fund’s performance and ensure the records are updated.
• Time management: The outsourcing entity takes care of complicated accounting tasks while they can focus on other priorities.
• Error-free reports: When skilled accounting employees handle accounting, the generated reports and statements remain flawless, reducing penalties.
• Cost efficiency: Hiring a private consultant is expensive and tedious, so outsourcing reduces the significant fee that has to be paid to a full-time employee
• Technological proficiency: Professional firms have the knowledge and experience regarding the software that best fits the accounting process. They use advanced software for accounting and tax reporting
• Scalability: When SMSF (self-managed super funds) grows, you don’t have to hire new employees to handle the extra load, but outsourced entities can handle it.

All the above benefits can be achieved through SMSF outsourcing to the right outsourcing partner.

Why partner with us?

Sundaram has 20+ years of experience in SMSF auditing and accounting services, and they offer tailor-made SMSF administration and audit solutions.

Our audit solutions are duly signed by an external auditor, providing our clients with end-to-end solutions.

Our expertise

In SMSF Admin

• Setting up a new fund in the reporting software
• Setting up an existing fund in the reporting software
• Fund accounting: Year-end processing & Online model with daily matching
• Liaising with the actuary provider in providing an “Actuary Certificate” for the fund
• Customized checklists and work instructions for processing
• Preparation of fund income-tax return
• Customized electronic work paper
• Preparation of BAS

In SMSF Auditing

• Customized electronic work papers
• Preparation of linked work papers for audit file
• Customized reporting, including schedules
• Compliance review and financial audit

Sundaram Business Services is one of the earliest offshore service providers in SMSF administration and auditing services. We have over 20 years of experience in the Australian SMSF landscape.

Specialisations

We provide outsourced teams to Australian businesses across Finance & Accounting, Portfolio Management, Self-Managed Super Funds, and Mortgage Broker Support. Our milestones include wrapping up 48K+ admin funds and 20K+ audit funds.