A guide to SMSF administration

Setting up and managing an SMSF is not for the faint hearted. It takes time, money, financial and legal knowledge, and a whole lot of legwork.

See also: A step-by-step guide to setting up an SMSF

While the ‘self-managed’ part implies you need to do it all yourself, this isn’t the case. This is where professional SMSF administration services come in.

Why hire an SMSF administrator?

An SMSF administrator can take over the considerable admin and compliance requirements of SMSFs, freeing up the time of trustees while ensuring the fund is operating within regulations. 

You may be wondering: Why not just opt for an APRA super fund if you’re going to hire someone else to run your SMSF?

Good question - the big reason is that you can outsource the time-consuming or complex SMSF admin tasks while still exercising control over your retirement investment choices. This gives you far more say in your super than you would have through a retail or industry super fund. 

See also: SMSFs vs retail & industry super funds

1. Savings.com.au's two cents

It's estimated one in four of Australia's 650,000+ SMSFs use some form of administrative support.

There's a growing trend of more funds engaging professional services as regulatory requirements have become more complex.

But SMSFs with more simple structures may not require such services. This can also apply to funds with trustees who have a sound knowledge of regulations, understand their responsibilities, and have the time to dedicate to administration. 

SMSFs need to weigh up the benefits vs costs of engaging a professional SMSF administrator or ask themselves what tasks may need to be outsourced and what can be done 'in-house'. There is no right or wrong answer. As with many financial decisions, it all comes down to individual circumstances.  

What does an SMSF administrator do?

An SMSF administrator can take over all, or part, of your SMSF administration according to your needs.

This can include:

• setting up the SMSF
• ensuring the SMSF is compliant
• ongoing administration of the SMSF

Setting up an SMSF

Getting your SMSF set up properly in the first place is critical to its administration down the track.

This is much involved in successfully setting up an SMSF with considerable paperwork, compliance requirements, and insurance.

See also: A guide to SMSF investment strategies

If you don't tick all the boxes, your fund may not be eligible for the ATO's tax concessions which generally see SMSFs pay a maximum 15% tax on most income. 

See also: Expert tax tips for SMSF trustees

Running an SMSF

Once you’ve gotten the SMSF established, there are compliance requirements that need to be applied to each decision as well as ongoing and annual tasks:

These include:

• recording all SMSF transactions
• maintaining an investments register
• preparing accounts and financial statements
• regularly reviewing the SMSF's investment strategy
• having SMSF assets regularly revalued 
• arranging the SMSF to be audited
• lodging an annual return
• paying SMSF fees and levies
• paying any tax that's due
• correctly paying any pensions

Some SMSF records need to be kept for up to 10 years. Others need to be kept for the life of the SMSF while others need to be updated regularly to be compliant.

Any SMSF loans to purchase assets also need to be administered separately.

See also: Can your SMSF borrow to invest? A simple guide for trustees

Failure to comply with the strict rules and regulations of running a complaint SMSF can result in hefty fines or, in some cases, civil and criminal penalties or the ATO acting to wind up your SMSF.

Pros and cons of an SMSF administrator

You might be a little nervous about taking a wrong turn with your SMSF, and rightfully so. SMSFs come with their fair share of risk due to strict compliance requirements.

But there's nothing to say you won't be able to successfully administer your own SMSF. This will generally take a considerable amount of time, organisational skills, and a commitment to acquiring the knowledge to do it yourself.

Let's look at some of the pros and cons of using an SMSF administrator

Benefits of an SMSF administrator

• Can save you time: Allows you to concentrate on earning income and researching the best investment options for your SMSF to maximise its returns

• Reduces compliance risks: Even with the best of intentions, inexperience, a lapse in oversight, or lack of knowledge can see SMSFs fall short of compliance standards. Professional administrators can ensure compliance

• Can pick and choose what tasks to outsource: SMFS administration services generally offer packages or be open to negotiation on what tasks you are comfortable doing yourself and what tasks you want them to do for you. This can see you offload time-consuming, confusing, or difficult tasks but keep those you're happy to carry out
• Access to specialist SMSF software and expertise: In simple terms, SMSF administrators have the goods and know their stuff. Tasks it may take you many hours to complete can be relatively simple for a professional outfit and not cost as much you think it might

Disadvantages of an SMSF administrator

• Cost: The main baulking point of engaging an SMSF administrator is the additional cost it will impose on the SMSF. Costs will depend on the complexity of the fund and need to weighed up against potential benefits
  
• Handing over complete oversight: At the end of the day, it's trustees who are responsible for administering an SMSF. If the administrator misses something, the trustee will carry the can for it. Also, if you're a control-freak, you may not feel comfortable with outsourcing any aspects of your SMSF administration (it may be why you chose to have an SMSF in the first place)
• Service not tailored to individual SMSF: This can be a matter of finding the right SMSF administrator but many large outfits may take a one-size-fits all approach to administering your fund. You may be just another client in the database and they may charge extra for a more personalise service. It's important to shop around