Contents
- Keeping assets separate
- Basic fund administration
- Document retention
- Lodgment and payment obligations
Except for not being able to undertake the annual SMSF audit, there are many options available to you as an SMSF trustee as to how you can administer your SMSF. Some of these options are:
- Outsource all tasks: engage professionals to undertake all tasks associated with the administration and management of your super fund;
- Outsource some tasks: engage professionals to undertake some tasks. Often, this means using a fund administrator to prepare accounts and lodge income tax returns and engaging a financial adviser to assist with investment decisions; or
- Undertake all tasks: this means making all the investment decisions, preparing the annual accounts and tax returns and maintaining all records.
It is certainly possible to undertake all tasks. However, most SMSF trustees would at least engage an accountant to prepare the accounts and tax return and many also engage a fund administrator and/or financial adviser.
Keeping assets separate
One important thing that some trustees/members fail to understand is that an SMSF is a separate legal entity and that the responsibilities of the person as a trustee or director of the trustee company differ from those of the individual as the member of the fund. In some cases, trustees/members mix their assets with those of the superannuation fund. This must be avoided at all costs for many reasons, including compliance with the covenants in s52 of the SIS Act, potential bankruptcy implications and relationship breakdowns.
All assets should be recorded as belonging to the SMSF. This is relatively easy for bank accounts, term deposits, managed funds and shares. The following terminology should be used for these types of assets.
Individual Trustees: John & Mary Citizen <J & M Citizen Superannuation Fund A/c>
or maybe written as:
John & Mary Citizen ATF J & M Citizen Superannuation Fund
Corporate Trustee: Citizen Holdings Pty Ltd <J & M Citizen Superannuation Fund A/c>
or maybe written as:
Citizen Holdings Pty Ltd ATF J & M Citizen Superannuation Fund
Note: ATF means “as trustee for”.
If you have four or more individual trustees for a fund and have share investments, you will probably not be able to record all trustee names. You will need to minute this and will probably need to use the same trustees only on the bank account as the account may need to be in the same name as the shares for dividend payments to be received. Additional trustee/s can be signatories on the accounts.
With real property assets, many land title offices will not record that an asset is held in trust. The title deeds will therefore only record the name of the trustee. As ownership is not recorded on the title further documentation is required.
- Suggested documentation for these situations are:
- Minute recording purchase of asset;
- Copy of cheque used for payment or electronic payment details; and
- Deed of trust
The above documentation (as for real property) would also be required for the purchase of other assets eg works of art, coins and other collectables. Receipts for such purposes and insurance documents should contain the same terminology as for bank accounts/shares, etc.
Basic SMSF administration
As a trustee, you are responsible for the administration and keeping records for your fund. Many fund administrators will only keep copies of original records, so you will be responsible for keeping the originals.
Good recordkeeping involves more than just knowing which records to keep and for how long – it is a legal requirement. A good recordkeeping system will also make it easier to:
- Complete the fund’s audit and annual return;
- Monitor the financial situation of your fund to assist you in making sound investment decisions; and
- Make the best use of any professionals you engage.
It is usual to establish a system that separates the more permanent records from the records that relate to a specific financial year. Permanent records would include:
- The SMSF trust deed (old and current);
- The SMSF investment strategy;
- Minutes of trustee meetings (usually kept in a separate file in date order);
- all signed trustee declarations;
- Records of trustees consenting to their appointment as a fund trustee; and
- Records of all changes in fund members and trustees.
Records relating to a specific financial year would include:
- Documents to explain the fund’s income eg bank and dividend statements;
- Receipts for deductible expenses;
- Other information used to prepare your fund’s returns, accounts and Statements eg source documents for ownership and valuation of assets eg CHESS statements, and purchase documents;
- Documents used to calculate your fund’s income tax liability, including copies of IAS/PAYG statements; and
- Other documents required by an independent auditor to determine how your fund has complied with the super laws.
It is recommended that you consult with your advisers as to the most effective record-keeping system as they may have specific requirements.
It is also important that as a trustee of an SMSF you keep proper and accurate records of any significant investment decisions eg purchasing a property, or transferring shares in a specie from a member. This is usually in the form of a minute and should include:
- Why a particular investment was chosen; and
- Whether all trustees agreed with the decision.
If one trustee uses the fund’s resources to invest in an asset that fails and there is no documentation, the other trustees may take action against you for failing to be diligent in your duties. If the investment decision was recorded in meeting minutes that were signed by the other trustees, then there will be a record to show the other trustees agreed with your actions.
Document retention
The following records for a minimum of five years:
- Accounting records that explain the transactions and financial position of your SMSF;
- An annual operating statement and annual statement of your SMSF’s financial position;
- Copies of all SMSF annual returns lodged;
- Copies of any other statements you are required to lodge with the ATO or provide to other super funds.
The following records need to be kept for a minimum of 10 years:
- Minutes of trustee meetings and decisions (where matters affecting your fund were discussed);
- Reasons for decisions on the storage of collectables and personal use assets;
- Records of all changes of trustees;
- Trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee;
- Members’ written consent to be appointed as trustees; and
- copies of all reports given to members.
In addition, the normal income tax record-keeping requirements need to be maintained eg for deductions and capital gains. Generally, deduction records need to be kept for five years after the date of lodgement of the relevant income tax return and capital gains records for five years after the last capital gain event relating to the asset.
Lodgment and payment obligations
The key dates for the lodgement of income tax and regulatory returns and the payment of any tax due are as follows.
- 31st October: this is the lodgement date for funds where prior year income tax returns were outstanding as at 30 June.
- 28th February: the income tax and annual return for new self-managed super funds are due on this date. Payment, if required, is also due on this date.
- 31st March: where a super fund has not appointed a tax agent, their return is due for lodgement and any outstanding tax due for payment on this date.
- 15th May: the returns for all remaining super funds and tax agent clients not allocated to other categories are due for lodgement and any tax is due for payment on this date.
This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.