Who does what for an SMSF?

SMSF Accountant or Administrator

An SMSF Accountant or Administrator prepares the Financial Statements in accordance with Accounting Standards and if they are also the Tax Agent, lodges your SMSF’s Annual Income Tax Return with the Australian Taxation Office (ATO). In most cases they will be your only contact. It has become common for Accounting Firms to outsource part or all of this function to an SMSF Administrator who will prepare the Financial Statements at a wholesale price.

The SMSF Accountant can provide some guidance on what happens in your SMSF. This is limited and policed by Australian Securities and Investment Commission (ASIC) who provides licencing to Financial Advisers.

Things to consider:

The SMSF Accountants role has become more limited in respect to SMSF with better data processing technology. Check your fees to make sure you are getting value for money
Accountants can only provide limited advice to you about your SMSF unless they are licenced by ASIC
They may be using a cheap offshore SMSF administrator to prepare the Financial Statements and Tax return. This should be disclosed in your engagement agreement with them but it may not always be obvious to you.
Your Accountant doesn’t have to choose the Auditor, Lawyer, or Actuary but it is common practice to.

SMSF Auditor

An SMSF is required to be audited each year before the Income Tax return can be lodged. The Audit can’t be done by just any Accountant. An SMSF Audit must comply with Australian Auditing Standards and the Superannuation Industry Supervision Act and it must be completed by an ASIC registered SMSF Auditor.

The are two parts to the audit. The first, Part A, is where the auditor gives an audit opinion on the whether or not the Financial Statements are in accordance with the applicable reporting framework and free from material misstatement. A material misstatement might be something like an Asset that is under or over-valued by an amount considered material. Materiality is generally 5-10% or $30,000, depending on the type of Asset or Liability. If the Auditor concludes that there is a material misstatement they will qualify Part A of the Audit report. This is reported to the ATO on the Income Tax Return.

The second or Part B or the Audit Report is where the Auditor provides an opinion on whether or not the SMSF has played by the rules outlined in the SIS Act. Again, if the Auditor concludes that the SMSF has materially breached any of the sections of the SIS Act that they are required to check, they will qualify Part B of the Audit Report and this must be included on the Income Tax Return. In addition, the Auditor may have to lodge an Auditor Contravention Report with the ATO with the details of the breach and what rectifications have been made to fix the breach.

It is important to note that whilst it is common practice in the SMSF Industry for the Accountant to arrange the Audit on behalf of the Trustee, it is the Trustee that must sign the Audit Engagement letter and has the direct relationship with the Auditor. An SMSF trustee can choose their own auditor and can switch Auditors as they wish. If, however an Auditor detects a breach during an audit and you then choose to halt the audit, the Auditor still has a responsibility to report that breach to the ATO if it is material.

Things to consider:

Audit fees can range from $150 to $1,500.
Some Audit businesses do send the auditing work to centres overseas
An SMSF Auditor must meet strict independence rules and cannot be involved in preparing the Financial Statement or giving the trustee advice

SMSF Lawyer

Whilst it is possible to create and execute the documents required to establish an SMSF as well as for certain events such as starting a pension without the assistance of a Lawyer, using a Specialist SMSF Lawyer for all of the legal documents required to run your SMSF is best practice. An SMSF Lawyer will consider your circumstances as a whole when writing the documents, whereas, if you are purchase these documents from an online provider this will not be the case. Whilst using a lawyer may cost you more in the short term, ensuring that you will not end up with unwanted outcomes in the future will likely save you thousands of dollars.

Actuary

If a member of an SMSF moves from accumulation phase into retirement phases whilst another member or members remain in accumulation phase then an actuarial certificate will be required to determine what percentage of the SMSF’s income is taxable unless assets have been segregated to specifically fund the pension. This certificate will be required each year until all members are in retirement phase. It is usual practice for the SMSF Accountant to organise for an Actuary to prepare the Actuarial Certificate

At Keep It Simple Super we provide cost effective wholesale SMSF Administration services to both Accountants and Financial Advisers. Get a quote here today.