A simple checklist for an SMSF’s annual return lodgements

Spending days wading through boxes full of receipts, bank accounts and other records isn’t the reason why most trustees set up their SMSF. With advances in tax software and outsourced administration services, those days are hopefully behind us. However, what can trustees do to take the pain out of the annual pilgrimage to the fund’s accountant, auditor and returns make it to the ATO on time?

Getting tax lodgement right
Fund administration and the annual return lodgement for an SMSF may not be everyone’s cup of tea but they’re essential in helping run an efficient and compliant fund. An SMSF that is well run should sail smoothly through the ATO as the quality of an SMSF’s annual return is a clear sign of how competently the fund is managed.

Late or disorganised lodgements of annual returns are more likely to draw the ATO’s attention for review, especially if the fund has a poor lodgement record over many years. What’s more, it is uncommon for the ATO to grant blanket extensions. Late lodgement may result in ATO penalties and the fund could experience delays in investing if the fund’s regulation details are removed from the Super Lookup site.

The financial year end paper chase

There are some trustees who do their SMSF’s administration and compliance themselves by preparing the fund’s accounts in-house. This can work well with the right administration and compliance platform. However, most trustees look for the alternative solution by employing administrators, accountants and tax agents who specialise in SMSFs to overcome this potentially daunting task.

While many SMSF professional administrators provide a checklist of the information required to complete the SMSF’s annual return, finding and collating the paperwork can provide a challenge as documents may not be all in the one place. Some documents could be with the administrator, others with the fund’s accountant – and others could be in the bottom of the trustee’s desk drawer.

Knowing what to chase up and trying to get records in timely manner may hold up the lodgement of the fund’s annual return. Sometimes this can be due to a delay with just one document.

Too little, too late
Another responsibility in the annual return preparation is ensuring that any fund irregularities are identified while there is still time they can be corrected. If everyone stays on top of the fund’s activities right throughout the year, it should reduce the risk of getting nasty surprises near to the lodgement date.

For example, if a member has not drawn enough as a pension for the year – but the underpayment is not found until October in the next financial year, it’s already too late to do anything about rectifying the problem. Or perhaps, the fund has purchased a property during the year but it has been used by members and doesn’t comply with super law.

Five ways to take the pain out of annual return lodgement time

1. Start early – well before June 30. The earlier the trustees, and anyone they rely on, begin the lodgement return preparation process, the easier it will be to get finished, even if there are hold ups.

2. Monitor activity and compliance throughout the year. It is essential to make sure that the fund has paid benefits, including the payment of minimum pension payments correctly; contributions received by the fund are within the caps; and the fund’s investment strategy is on track.

3. Arrange digital data feeds to have direct access to bank and brokerage accounts to enable information to be sent directly to any administration service used by the fund. This will cut down administration time and also reduce the risk of errors.

4. Provide information to the fund’s accountant, administrator or tax agent when it is first received. Trustees may need to store other documents, such as the fund’s trust deed, in an appropriate place to save time hunting for them later on.

5. Draw on experience. Don’t forget the annual lodgement of the SMSF returns happens every year, so trustees can expect that administrators will likely ask for similar information every year. Therefore, trustees who keep good records as part of the return lodgement plan and this should probably get things completed in a timely way.

Trustees who leave the annual return preparation to the last minute are more likely to end up in a panic trying to find all the information required and may face penalties for late lodgement. A well thought out plan, and an early start could avoid all the anxiety at lodgement time.