I have been asked, if you had a general accounting practice and clients with SMSF (for whom you did the administration) what special work would you do for them? In particular, based on what you have seen, what would you do to help your clients protect their SMSF and keep them under the ATO Radar?
Check out the Financial Planner and the Investment Balances
I had the horrible experience of having to advise an SMSF Audit client the whole $2 million in her SMSF had, according to the financial planner, “all gone”. When I tracked him down, he said he was living in a caravan and had spent all of his clients’ investments. No wonder I had not been able to confirm balances.
So if I was the accountant for the SMSF, I would check the bona fides for the financial planner, check she or he was registered with ASIC, was a member of professional associations and allied with an appropriate dealer group. I would want to be sure there was adequate professional insurance. Plus, I would check balances more frequently than annually.
Contributions and pre June 30 Review
I would do a review of the administration of all SMSF prior to June 30, so as to be sure there were no excess contributions. Also, I would look for issues which could give rise to any likely Contravention notices, so as to see if corrections can be quickly made.
I would ensure there was a signed Trust Deed and Minutes. I would look for appropriately signed pension documents and if not there, ensure they were prepared and signed. I would check the Trust Deed to ensure it allowed for a pension to be paid.
Further, has there been a commutation of an old pension? Is this adequately dealt with?
Investments and Borrowing
This is difficult as some firms have in house financial planners, others do not. So it affects the financial advice that can be given. If clients wanted to borrow money so their fund could invest in property, I would want to be sure it is an appropriate investment, given the age of the members.
I would want to check all of the arrangements for the property purchase and borrowing to ensure any fees paid to a third party are reasonable.
In House Assets
Has the fund lent any money to members or related parties? If so, has this been done at arms-length terms?
Corporate vs Individual Trustees
Does the fund have an individual or corporate trustee structure? Given the noises being made by Regulators to require corporate trustees for new SMSF, is it now appropriate for existing SMSF clients to consider a change to corporate trustees?
Whilst having benefits of allowing a single member to be a Director (or Trustee), caution is required to avoid any breaches of SIS Reg 4.09A (where names of asset owners have not been updated to reflect the new company trustee name).
These are just some of the issues I would consider and review, if I was responsible for the administration of client SMSF. Part II of this topic will be covered in a later article.
© David Saul
David was among the first professionals to be accredited through SPAA as an SMSF Specialist Advisor™. He is also a Chartered Accountant and holds a Bachelor of Financial Administration from the University of New England, Armidale NSW.