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Factors to Consider in SMSF Administration

Factors to Consider in SMSF Administration

SMSF administration takes time and effort. If you decide to ask for help to do the work, you should be aware of the types of support that you can get in the market or SMSF administration service. There a many options to choose from and there are different pricing models for them as well.

We hope that with this article you will become aware of the various options available in the administration of SMSF. Before going any further, you might want to ask some questions to help you make the decision of what kind of help do you need.

  • Do you need an accountant or an SMSF administration company?
  • Do you need a daily SMSF administrator or someone to take care of end-of-year requirements?
  • How much would the administration cost and how do SMSF professionals charge? What suits your SMSF best?
  • What are the services they offer? What can they do and what can they not do?

A personal accountant or an SMSF administrator?

There are two ways on how you can complete your annual SMSF administration duties aside from doing it yourself. You can use an adviser or personal accountant, if they do SMSF administration or through an SMSF administration company which are available online.

The difference between these two options is that an accountant or adviser is someone whom you likely have a personal relationship with. He or she may be in charge of taking care of your finances like accounting for your business. The accountant or adviser knows your situation and can help you with ownership structures and tax strategies and an SMSF is only one component of what they are dealing with.

On the other hand, the SMSF administration company provides SMSF administration service only. It does not give any advice or have a personal relationship type of service. What you can do is send the paperwork to their address, they process them, then they come back to you for signing, and the returns are sent to the ATO and an audit is arranged. The administrator either provides service to the trustees or to service accountants and advisers.

For business who have several ownership structures, a personal accountant is ideal because integrated strategy and tax advice are very important to the SMSF. For others, a simple end of year admin service would be more effective.

Now you are left with what type of admin to choose, end-of-year or daily SMSF administration.

Year-end administration includes accountants and many SMSF administration companies. What happens here is that trustees give the administrator the necessary paperwork for the fund. This includes cash statements, income and dividend statements, transactions and other information with the explanations of transactions from which the administrator process the information. Inquiries about certain transactions without documentation may transpire and that the administrator needs to get information on. The administrator then prepares the audit file and sends it to the independent SMSF auditor for the annual audit of the fund. Once the documents are signed, the administrator gets the statements of the members ready, and lodges the income tax returns to ATO.

Daily SMSF administration is when the administrator’s address is used as the mailing address of the fund. All transactions and data of the fund go to the administrator and recorded in their system on a daily basis. The objective of the system is to:

  • Become aware of compliance issues as they happen. An example would be undocumented withdrawals that are not allowed under the SIS act. If such withdrawals take place the administrator can inform the trustees and fix the situation within the year instead of waiting for the year-end.
  • Reduce the trustee’s paper-work.
  • Have a more efficient administration system that spread out admin functions throughout the year, than letting them pile up in a few months.

How much does it cost to hire SMSF professionals and how do they charge?

Charges could be based on the number of transactions or time involved. Usually, there is a base fee for SMSF administration services, on a certain number of transactions or time involved and surcharges apply for transactions or time over and above the base. Accountants usually charge in this manner. The more transactions there are, the longer it takes to complete the work. It also depends on the services packaged with the administration. SMSF administration software nowadays can extract data via data download and no longer needs to be manually entered anymore. Be aware of how much transaction data is downloadable because this saves the administrator a lot of time.

Charges based on the number of investments held by the SMSF. There is usually a base cost for investments held, then additional charges apply for every investment held over than the base for the year. This may be costly if you have different investments throughout the year.

Charges based on the amount of funds in the SMSF. This is either a flat dollar amount or a percentage based on how much money the fund has. You can have as many transactions or investments in the fund as you like without having to think of exceeding the base. This is a good option for funds that have a higher turnover but they are highly dependent on the assets in the fund and the charges of the admin provider. It can be a very costly option for funds with a lot of money.

Charges based on a flat fee. These are not very common but there are some that exist. Only a flat fee is charged no matter how many investments, transactions or assets you have in the fund. Such systems are very attractive because members can transact as much as they want and have as many funds as they want and still be charged only the flat fee. It is the most realistic charging system that administrators can use.

What are the services offered by SMSF professional administrators?

Some professional SMSF administration services are cheap because they have a limited service. Generally, all these services can provide the essential SMSF administration service requirements like preparing financial statements, annual compliance to ATO like tax returns, and preparation for an audit. If this is all that you want, then go with the best deal. But if you are looking for added services, you might want to ask a few questions before making the choice.

  • Will the service complete reporting to ATO when a member withdraws his lump sum or a start pension or when he or she takes his or her benefits? Would it process Eligible Termination Payments?
  • Does it provide technical advice throughout the year? If not, where can this advice be sourced?
  • Do they process trust deed updates? When certain laws change, trust deeds sometimes need updating, who is going to do that? Who will inform the trustees if it is needed? How much will it cost and would it be a part of the admin service?
  • Does the administrator have an online facility where the components of the fund can be viewed?
  • Would the admin help reduce trustee’s paperwork and take care of all of all the mail for the fund?
  • Does the SMSF administration package include personal and general advice on superannuation and investments? Is retirement planning part of the service provided?

Being aware of what the administrators offer will help you compare prices.

Before choosing your fund administrator you have to decide on what type of service you want, the service package you need, have a list of the things that you want and find the best price in the SMSF administration market.

Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit,  and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.

Call our Melbourne team today on 03 9088 2242, or email us via  audit@