MANY self-managed superannuation funds (SMSFs) aren’t all that busy. Many hold blue-chip, solid-dividend-paying (fully franked) shares, property or units in a managed fund.
They’re like a sleeping country town in the middle of summer.
Nothing much happens from 1 July to 30 June.
In fact, the biggest activity undertaken by many an SMSF has nothing to do with the management of its assets but with compliance.
Each year the fund needs to be audited. To be audited, you have to prepare accounts and a tax return.
Preparation of accounts will easily set you back a few thousand dollars.
An audit comes to at least $400.
The ATO takes another $269 in a supervisory levy.
All that, and basically nothing has happened in your fund all year.
The problem is that accountants feel compelled to not just prepare a tax return, but also a set of accounts that meet the Australian Accounting Standards.
Not that they have to, but they do.
That’s why it costs your fund several thousands of dollars each year to comply.
However, the legislation only requires SMSFs to prepare a special purpose financial report for the financial year. This means you don’t have to meet Australian Accounting Standards, although your report must add up, of course.
You would need some sort of operating statement and a balance sheet showing member account balances. Your tax return would be based on those.
If your fund isn’t very active, a special purpose financial report may be all you need. If you have accounting nous, you may be able to prepare this report yourself and save your fund a lot of money.
A word of warning, though. Just being able to add up, subtract, multiply and perform long division won’t cut it. It does require an understanding of basic accounting concepts while completion of a fund’s tax return, even a simple one, is finicky work.
You will still have to find an independent auditor (online) prepared to go over your special purpose financial report.
Unfortunately, there’s no way to cut out the ATO supervisory levy either.
All this is not a criticism of professional accountants. They wisely stick to the Australian Accounting Standards to protect themselves.
Draft legislation just introduced will require “registrable superannuation entities” (retail and industry funds mainly) to prepare financial reports in accordance with Australian Accounting Standards.
Your SMSF, however, is not a registrable superannuation entity for the purpose of legislation. It can keep doing special purpose reports.
