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  • Writer's pictureTyson Jonas

6 Easy Tips To Manage Your SMSF

Life is tough for the trustee of an SMSF. You need to juggle a wide variety of documents to ensure your fund remains compliant and you keep the auditors happy. But what do you need to keep and how best to do it?

Here’s six easy tips to ensure your fund runs efficiently and you don’t drown in a sea of paperwork:

1. Remember the buck stops with you

It’s important to remember that even if you use an accountant, financial adviser or administration service, in the end, trustees are ultimately responsible for ensuring they have proper and accurate tax and super records for their fund. Having detailed records also gives the ATO comfort your fund is well-run.

“The regulator likes to see more rather than less documentation on the administrative processes of a SMSF,” explains Peter Hogan, the SMSF Association’s Head of Education and Technical.

“The ATO will accept you’re running the fund properly if everything is fully documented and accessible.”

2. Document as much as possible

Transparent processes are essential for every SMSF as this allows the regulator or auditor to understand a decision and the trustees’ thought process.

“It’s important trustees document as much as they can of the decisions they make. Otherwise, when you’re asked later why you made a decision, you’re likely to have forgotten the prior deliberations,” says Hogan.

“All trustee minutes and decisions – even if handwritten – should be collected together and readily accessible.”

3. Establish good processes

Good record-keeping is also about setting up effective systems that make it easy to lodge the SMSF’s annual return and complete the independent audit.

All SMSF records need to be kept in writing and in English. Any electronic records must be verifiable by the ATO and in a form it can access and understand.

“Being able to find things is very important, so having a simple system to create, manage and access the fund’s records is vital,” notes Hogan.

4. Keep detailed investment records

Without good record-keeping on investments and investment decisions, breaches can easily occur.

“The investment objectives and strategy should be living documents and should reflect the fund’s investments at all times. You should also keep prior versions of these documents,” explains Hogan.

Anything you can document should be, he says. “Often the regulator will ask why you made an investment decision and trustees with no documentation can’t justify it. There’s no penalty for a bad decision provided you made the decision in good faith and it’s appropriately documented to support that it was a reasonable decision at the time.”

5. Save time and money

Efficient record-keeping can reduce preparation time and expensive professional fees when it comes to auditing and fund administration tasks.

“The same questions will be asked in an annual audit as by the regulator, so ensure you have everything documented and on-hand. For example, if you change the investment strategy during the year, the auditor will want to see both the old and new investment strategies, as they will be signing off different strategies for each part of the year,” notes Hogan.

Good records also make it easier to get the best from the professionals engaged by the fund.

“If you use a financial adviser, they will need access to all the investment documents when developing a Statement of Advice, so ensure they’re readily available if you want useful investment advice.”

6. Keep permanent records secure

SMSFs must keep some documents indefinitely. “Trustees need to be careful and ensure these are safely retained, or you can find yourself in very difficult circumstances,” says Hogan.

Documents to be retained for the life of the fund include the trust deed, any deed variations, the investment strategy, reviews of the investment strategy and binding death benefit nominations, even when no longer valid.

“These form part of the governing rules of the fund and bind the trustees to act in certain ways, so they’re very important.”

Key documents should be securely stored and protected against possible loss due to disasters, such as fire or technological failure.

How long to keep SMSF records?

Trustees need to keep the following records for a minimum of five years:

Accurate and accessible accounting records that explain the transactions and financial position of your SMSF.An annual operating statement and an annual statement of your SMSF’s financial position.Copies of all SMSF annual returns lodged.Copies of transfer balance account reports lodged.Copies of any other statements required for lodgment with the ATO or provided to other super funds.

The following records need to be kept for a minimum of 10 years:

Minutes of trustee meetings and decisions (e.g. a review of the investment strategy).Records of all changes of trustees.Trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007.Members’ written consent to be appointed as trustees.Copies of all reports given to members.Documented decisions about storage of collectables and personal use assets.

Source: ATO

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