A self-managed super fund (SMSF) gives you greater control over how your retirement savings are invested, including the ability to invest in assets such as direct property. However, with that control comes responsibility.
Like an industry or retail super fund, an SMSF is managed by its trustees, who are legally responsible for ensuring the fund complies with Australia’s superannuation laws. However, in the case of SMSF the trustees are also the members of the fund.
Whether you’re considering establishing an SMSF or already have one, understanding your obligations and keeping your documentation up to date can make managing your fund considerably easier.
Here are some of the most common questions about establishing and maintaining a compliant SMSF.
1. How much does it cost to set up an SMSF?
Establishing a Self-Managed Superannuation Fund involves preparing the trust deed, appointing trustees, registering the fund with the ATO and arranging the necessary accounts and documentation.
The costs depend on the fund’s structure, including whether you choose individual trustees or a corporate trustee. Additional costs may apply if you’re planning to purchase property or establish more complex investment arrangements.
2. What are the ongoing costs of maintaining an SMSF?
An SMSF has ongoing expenses, and these include:
- Annual financial statements and tax return preparation
- Independent annual auditing
- ATO supervisory levies
- Accounting and administration services
- ASIC fees for corporate trustees
- Investment-related expenses, such as property valuations and insurance
The costs vary depending on the fund’s investments and complexity. We’ll outline the costs if you’re considering setting up an SMSF so that you know what’s involved before you establish your own SMSF.
3. Who is responsible for ensuring my SMSF remains compliant?
The trustees are ultimately responsible for the fund’s compliance, even when accountants, financial advisers or administrators assist with managing it.
Trustee obligations include ensuring:
- The fund operates according to its trust deed and superannuation laws
- Investments comply with the fund’s investment strategy
- Fund assets remain separate from personal assets
- Accurate records and documentation are maintained
- Annual financial statements, audits and tax returns are completed
- Super benefits are only accessed when legally permitted
Your accountant can help with administration and reporting, but trustees must understand their responsibilities.
4. Does my SMSF need to be audited every year?
Yes. Every SMSF must undergo an independent annual audit by an ASIC-registered SMSF auditor, even if there has been little investment activity.
The auditor examines the fund’s financial statements and compliance with superannuation legislation.
At Colledges, we can help prepare your annual financial statements and coordinate the independent audit process.
5. What documents do I need to keep for my annual SMSF audit?
Good recordkeeping is essential. Auditors require evidence of the fund’s investments, transactions, ownership and trustee decisions.
Depending on your fund, this may include:
- Bank statements and investment records
- Property titles and purchase documentation
- Current market valuations of fund assets
- Rental agreements and property expense records
- Trustee meeting minutes and resolutions
- Investment strategies and evidence of reviews
- Contribution, rollover and pension documentation
- Loan agreements and related-party transaction records
These records should be maintained throughout the year, not just when your annual audit is due.
Generally, accounting records must be retained for at least five years, while trustee minutes and certain other records must be kept for at least ten years.
6. Do I need to obtain a property valuation every year?
If your SMSF owns property, it must be reported at market value in the fund’s annual financial statements.
A formal independent valuation isn’t necessarily required every year, but trustees must have sufficient objective evidence supporting the property’s market value.
Depending on the circumstances, this might include a professional valuation, sales in the area, or other reliable market evidence.
The ATO and SMSF auditors are paying close attention to property valuations, so unsupported or outdated estimates can create compliance issues.
7. What happens if my SMSF doesn’t meet its compliance obligations?
Consequences depend on the seriousness of the issue.
Some breaches can be corrected, while more serious matters may result in ATO penalties, additional tax consequences or regulatory action.
Auditors may also be required to report compliance issues to the ATO. Identifying issues early is much better than discovering them during the annual audit.
8. How can I make managing my SMSF easier?
Treat compliance as an ongoing responsibility rather than an annual event.
Keep financial records organised, document trustee decisions, regularly review your investment strategy and maintain supporting evidence for fund assets.
If your SMSF holds property, pay particular attention to valuations, ownership records, leases and expenses.
Seek professional advice before making significant investment decisions or changing your fund’s structure.
How Colledges can help you maintain a compliant SMSF
At Colledges Accountants + Advisors, we understand that managing an SMSF involves much more than preparing an annual tax return.
We can assist with establishing your SMSF, preparing financial statements and tax returns, coordinating independent audits and helping you understand your ongoing compliance responsibilities.
Importantly, we can help identify the documentation and supporting evidence you’ll need throughout the year, so you’re better prepared when your annual audit comes around.
We’re here to help. Phone us on (03) 9851 6500 or email hello@colledges.com.au to arrange a time to talk about setting up an SMSF, or if you already have one, how we can help you maintain compliance through the year.
