There is no doubt that your time as an SMSF Accountant/Administrator continues to be eaten up by more onerous and time-consuming requirements – think client identity verification, trying to help your clients with client linking etc. And with a busy tax lodgement schedule to keep on top of too, the time you have left to properly onboard an existing SMSF to your service might be limited.
So does it make sense to allocate your precious, limited time to really looking closely at your SMSF takeovers?
The simple answer is absolutely; why wouldn’t you impress your clients right at the start of your relationship with them. And if you can, why wouldn’t you want to shield yourself and your clients from possible future dramas. Oh, and you might just save them a significant amount of tax too!!
Here’s our Top 5 things to check for an SMSF Takeover:
Is the chain of trust deeds and other statutory records intact
It is pretty hard to determine the health of your SMSF Takeover client without having everything you need to understand the SMSF. Do you have all the deeds in the chain? Do you have all the associated documents referred to, like Trustee changes, ATO Trustee Declarations etc? Do you have all the pages of each document?
Does the chain of trust deeds look OK?
Most accountants and advisers aren’t also lawyers, so this step is not about making legal conclusions. It’s about looking at the contents a little bit more closely to see whether you believe a lawyer should be engaged. Remember your clients are putting, in some cases, the majority of their wealth into their SMSF and there can be all sorts of possible legal ramifications if the trust deed chain is faulty.
Take a look at things like whether all spots to be signed and dated have been. Do signatures actually match to the person who is written as being the one to sign in that spot (you’ll be surprised what you find!!) If it needed stamping, has it been stamped? Is the fund name the same in every spot in every deed? If you are counting the number of missing dates, signatures, fund name variations, etc it might just be time to call the lawyers for a chain of deed review.
Do a check of the name in which Bank Accounts, Investments and Insurance is held
Doesn’t it feel good when your clients get a clear audit management letter? Getting ahead of discrepancies in the name in which investments etc are held is one way to reduce the possible audit management points. And there are good reasons that it is a statutory requirement to keep SMSF assets etc separate, namely that the SMSF can be a way to protect these assets from business and personal risks like creditors.
The best protection comes if the SMSF assets are all held in the name of trustee for the SMSF, for example, XYZ Pty Ltd ATF XYZ SMSF.
Check for lost super and unclaimed monies
Everyone loves an unexpected windfall (even if the money has always been theirs!!). Taking the time to dig up lost super, unbanked dividends and the like will most definitely impress your SMSF takeover client. And sometimes even you’ll be surprised by the amount of money you find.
Check the preservation and tax components
This is one thing that you might pass over as being simply too hard or do you just take for granted that the previous reputable firm that charged the client a small fortune, surely got these number right and you should just be able to rely on what is in the previous accounts?
One of the key reasons to make sure the tax and preservation components are correct is so you can maximise your SMSF Takeover client’s ability to access benefits whilst minimising the possible tax they (or their dependent's) pay.
Benefits classified as unrestricted non-preserved can be accessed without retiring or being 65 years of age or older. If your SMSF Takeover clients were accumulating super before 1999 there is a real chance, they may have unrestricted non-preserved benefits.
Having unexpected access to some of their SMSF monies might just be a gift your SMSF Takeover client is happy to receive.
An even better gift is finding them potential tax savings. That gift is best explained with a real-life example:
$1.3m recorded as Preserved/Taxable
Tax-Free component determined with reference to past rollover statement $400K
That’s up to $68,000 in tax saved if the Tax-Free Component was paid to an adult child on the death of the member
That’s a very good news story for your SMSF Takeover client and their children. It could even be the reason the children keep you on as their SMSF adviser or accountant in the future.
That’s a much better position to be in than having those same children looking to you to recover unnecessary tax paid in the case you didn’t uncover an error like this?
Keep It Simple Super provides wholesale SMSF Administration services that rely on simple workflows that remove complexity and give you back your time. For 15 years, these workflows have helped Financial Advisers and Accountants build and grow services for their clients. Get in touch now.