SMSF professionals: Your guide to surviving tax lodgement
By Mark Ellem
With advances in tax software and outsourced administration services, the days of trawling through shoeboxes full of receipts at tax time are largely behind us. But SMSF tax lodgement can still be plagued with inefficiency. Why is it so painful – and what can be done about it?
With its reams of paperwork and focus on minutiae, you can be sure that administration isn’t what drives most trustees to set up an SMSF. So it’s not surprising that your clients will often pass on this largely thankless job to you.
Getting tax lodgement right
While administration and tax lodgement are clearly not key selling points for SMSFs, they’re essential to running a compliant fund. And it’s critical that they’re done well – with the ATO regarding the quality of an SMSF’s tax lodgement as a sign of how effectively a fund is run.
Late or sloppy lodgements are more likely to draw the attention of the ATO for auditing. What’s more, it is uncommon for the ATO to grant blanket extensions – and late lodgements may be penalised.
The EOFY paper chase
I am an advocate of doing SMSF administration and compliance in-house. With the right administration and compliance platform, it can be a rewarding profit centre that adds great value to a practice. However, I also understand that some practitioners find SMSF administration and compliance daunting and look for an alternative solution for their clients with SMSFs.
Where SMSF administration and compliance will not be in-house, one of the best ways to make SMSF lodgements more efficient is to outsource to a quality administration service. But, unfortunately, this alone won’t be enough to guarantee a completely pain-free lodgement process.
While most administrators provide a checklist of the information they need, finding and collating it can often be a challenge. Some documents may already be with the administrator, others with you – while others could be in the bottom of your client’s desk drawer.
Knowing what you need to chase and getting it on time can be tedious and time-consuming. And a hold up with a single document could lead to a late lodgement and penalties for your client.
Too little, too late
Another challenge is ensuring that you can pick up fund irregularities while you still have a chance to correct them. If you don’t stay on top of the fund’s activity throughout the year, you could be in for a nasty surprise.
For example, if your client hasn’t drawn enough as a pension – but you realise this in October, it’s already too late to rectify. Or perhaps the trustee has brought a property during the year but has used it in a way that doesn’t comply with super law.
Five ways to take the pain out of tax lodgement time
- Start early – well before June 30. The earlier you begin the lodgement process, the easier it will be to get it finished, even if there are hold ups.
- Monitor activity and compliance throughout the year. Make sure that your client has met their pension payment minimums, stayed within their contribution caps, and maximised their strategy before 30 June comes around.
- Set up data feeds. Arrange to have digital data feeds from your client’s bank and brokerage accounts sent directly to your administration service – cutting administration time and reducing the risk of errors.
- Provide information when you first receive it. Send documents to the administrators as you receive them – or filing them with all your client’s documentation to save time hunting for them later on.
- Draw on experience. Your administrators will likely ask for the same information every year. So keep good records to refer to when the next financial year comes round.