How Does Accounting Work With An SMSF? Podcast

  • Sonny RahimSonny Rahim Ashwin RamdasAshwin Ramdas
  • Updated Dec 20, 2022

  • Mate Checked

    This information has been reviewed by our SMSF Mates before it was published as part of our review process.

Accounting For Your SMSF Podcast Transcript

Welcome to SMSF Mate. Our general advice warning. We are required to warn you that any advice has been prepared without taking into account your objectives, financial situations or needs and because of that you should before acting on any advice consider the appropriateness of the advice having regard to your own objectives, financial services and needs. Where the advice relates to the acquisition or possible acquisition of a particular financial product you should obtain a product disclosure statement relating to that product and consider the PDS before making any decision about whether to acquire the product.

Tim: Welcome back to SMSF Mate Podcast. Today, we’re talking about the costs set up an SMSF, what they are and what you can expect to pay and also if there are differences between an SMSF accountant and a regular accountant and what those things are. My name’s Tim. I’m here with?

Sonny: Sonny.

Ashwin: And Ashwin.

Sonny: Ashwin, maybe I’ll kick off with the SMSF accountant part given that you are the accountant and then maybe defer to you to talk about some of the establishment costs but i think the simple answer is you have self-managed super fund only accountants and then you’ve got accounting firms with divisions that deal in self-managed super funds. I think there are some accountants specialising in the space and there are some accountants out there that specialise in a more general way as part of a broader offering they have within their accounting firm. There’s a lot of online providers these days. There’s software in there in the space that makes establishment and managing and reporting around self-managed super funds a whole lot easier and more efficient.

I think there are some online providers that provide that direct access to self-managed super fund trustees and investors. There’s some software that accountants themselves use in making their process and service delivery a whole lot more efficient. Yes, a self-managed super fund accountant and a normal accountant are one and the same. It just depends on how they deliver and provide that service and then you’ve got a bunch of online providers as well that do it from a more remote access all of which will have different service offerings, different cost structures. It really comes down to what works best but after maybe you talk about some of the cost Ashwin.

Ashwin: I think a lot of the costs will determine basically more around the investments. The type of investments that the super fund is investing in will dictate the cost of compliance. From a pure standpoint any professional accountant who’s registered with the tax agent board can provide SMSF tax returns. It’s just they probably need to have a skillset around it. I would say a lot of it now would come back to what technology stack they’re using would reduce the cost for compliance and to make sure they’re compliant with the act and preparing reports to a standard because a lot of the stuff you need to be able now for a self-managed super fund you need to be able to accept rollovers through it so some of the software actually creates the rollover platform so your fund can receive money in. You compare the amount reports to for the money to go out to an another fund if it gets closed. All those sort of things really will come down to software and people that are using older technology stacks or software solutions will find it difficult to comply with that. They might still be compliant but they’re going to pre-charge a lot more for it because they’re not using the full efficiencies.

Tim: If I came into your office and said I want to set up an SMSF. What’s it going to cost me? What would you say?

Ashwin: First thing would be have you got advice around an SMSF. I’d redirect it to an advisor to go get that advice. Then if you came back and said this then there’s a full declaration that you understand what you’re getting into and everything else around it but a super fund setup if there’s no trustee i think we’re roughly charging 650 plus GST to set up a trust self-managed super fund. If it’s got a corporate trustee around it it’s another 1200 bucks. That’s because there’s a six hundred dollar fee to…

Sonny: Is that documentation cost in general?

Ashwin: That is documentation cost.

Sonny: Time of the accountant, cost on that as well. Probably just the point of clarity the reason Ashwin was deferring then to advice around establishment is that in order to establish a self-managed super fund you need to take advice around that or that advice needs to be given by a licensed advisor. Now in Ashwin’s case he isn’t a licensed advisor anymore.

Ashwin: Not anymore.

Sonny: So he defers that advice out but there are accounting firms that will have license advisors in-house or they might be licensed themselves so they provide the advice for establishment and take care of the establishment under the one umbrella.

Tim: Okay and what like the advice is just based on the individual circumstances and where they’re at and what they want to achieve?

Ashwin: A little bit. The things that need to be checked and it’s why we’ve probably said in this podcast a few times is it’s a big journey to go down the self-managed pathway. You should get an advice doc to give you the peace of mind that it is still a pathway you should be doing. If you get an advice on saying not to do it and you still decide to do it well, okay everyone’s told you not to do it but you’ve still done it. That’s on you now but you want it. Why would you do it? If a professional in their field is recommended, what you’re trying to do probably doesn’t fit your profile and SMSF is going to cost way too much to run compared to what you’d have in an alternative fund and it’s detrimental to your long-term future. Why would you do it?

I think by having that step it stops for people that have caught up with someone under barbecue or caught up with someone say get into this. Oh shit, it’s actually a bit more serious than that. I need to see an advisor to get that process. I think that’s part of it. Some people go okay, well it’s only less than 600, might be 700 bucks or 2000 to set up. It’s not that expensive to get in. I’ll get in. No, there’s compliance costs. The annual accounting work for a client generally ranges from 1500 to 4000 and some funds maybe charge 10,000 or 9,000 or 15,000 depending how complex the investment’s involved in it and what needs to be assessed. There are some funds that have art and that requires an order to go check that art is on a public display and the location available to those to go or is it an in-house asset and how is it valued. There are a lot of complications with SMSF if the investments are diverse.

From a fee point of view compliance can be maintained and reduced by having good software. For me, the most common ones I’m familiar with that accountants use a software called BGL 360 and CAS Super and all these software talk to the ASX. They talk to different data feeds and bring in all the transactions. It saves a lot of time instead of trying to source it. It’s all in one place so that makes compliance a bit easier. That’s the sort of stuff you want to ask. If you’re going to go around and find an accountant you can go what’s the fees and what are you doing to reduce those fees. Things like what technology you’re using. Does it work through and ask the question what could I do to make it cheaper for you, the accountant to make the job easier because if you ask that they will tell you. Hey, if you did all of these things I don’t have to spend time doing that.

Sonny: Cheap by lower cost but by more efficient, more effective, sometimes safer. I think it’s a really good question to ask for people that are considering self-managed super funds speak to the accountant to say well, how are you actually managing it. There used to be predominantly managed to say if you take a bank account that’s part of the self-managed super fund which fund obviously needs. Each of those transactions and each of those investments that went out of the bank account then needed to be reported on. Some accountants used to code and have to reconcile each and every one of those transactions by a ledger or an entry that they would have to effectively manually do each bank statement, line item.

Some of the programs that Ashwin mentioned have bank feeds or data feeds directly from the bank and directly from an investment platform potentially which then enable the direct either auto allocation or prompting of an allocation of a transaction. Now, I’m not going to say any which way is right or wrong or better or worse but if you have an automatic data feed, now there’s security and all those sorts of issues you’ve got to consider when you’re assessing a service provider and a software…

Ashwin: From a cost point of view excluding the data thing, the data feed makes so much easier for the end programming, for anyone right? If you have all the data there you’re not having to check it. Obviously one of the things with a self-managed super fund is listed shares and things have to be valued at the end of the year. If you have a hundred different shares that means and you don’t have a software provider, someone’s looking through each share to look at what the closing value is and adjusting the transaction. That’s a lot of work.

Sonny: That’s manual entry.

Ashwin: Manual entry as opposed to software they’ll grab and go bang there’s the valuations. Even better because in the old days before we were using the software maybe five years ago. If you did a DRP, you’ve got to look up what the shared reinvestment plan. Let’s say you’ve got a dividend from one of the big four and they deposit in your account and you bought shares we have to look up what the DRP price is, add it to your cost base, do the value adjustment, add the new units. It’s a lot of work. Now it’s all automated.

Sonny: From a corporate action point of view.

Ashwin: Corporate action point of view. If there’s a D merger or an M and A event, it’s already split out. You’ve got solutions around that. It makes it a lot easier from a compliance point of view when the right software’s being used. The accountant tick the box with their registered tax agent but also take the box what software stack are they using to make compliance easy. That will give you at least a peace of mind that okay, they’re doing everything they can to reduce the costs of managing the practice then it’s really time to process the amount of transactions complexity in that fund. I think that’s my starting point when anyone say.

Sonny: Process, there’s so many efficiencies with processing time. If you think traditionally accountants would charge on an hourly rate still. If you can make that more efficient then the cost of processing is lower. It makes sense. It’s more efficient. I think there’s a misconception sometimes that that means it directly relates to a lower overall cost. It could and in some cases should but if you’ve got an example where now your processing cost is a lot less but pre and post let’s say using software but if the accountant or advisor now has more time to provide value add advice whether that be in structuring contribution strategies, investment management when you’re now talking about an advisor i think the overall cost might stay the same but the value…

Ashwin: The value is different.

Sonny: The value’s different and you’re getting a better outcome. Personally I’d prefer more time on the value add than I would value the processing cost. I think in some cases I think it’s right that the processing cost should come down but it’s not a direct expectation that the overall cost at different points in time costs down.

Ashwin: Agreed. Even some of these software well i know from BGL’s point of view and CAS probably has as well that you can give an access to the trustee. The trustee can actually run their own reports if the transactions are coded regularly and get half yearly reports. They can actually see it or post away in the year-end report. There’s a lot of benefits of moving to those software platforms. Then you can spend more time on strategies or rebalancing or investing and things that the trustee wants to do because they’ve got the access to the data. It’s all pulled into one place.

Sonny: Timely access, accurate.

Ashwin: Exactly so that’s one of the good things about tech because you can find some accountants that could maybe do it for cheaper but if you don’t get the value or you don’t use that value then it’s also skewed a bit as well.

Sonny: T shouldn’t be again cheap as always, it’s a risky approach isn’t it? It shouldn’t be a race to the bottom to have the cheapest processing because the processing of data in a self-managed super funds, there is only one aspect of it and that aspect now technology help considerably but it’s the broader advice, it’s the oversight around it that to work with the trustees that actually count.

Tim: Just going back initial setup cost so assuming that i fit the bill and I’ve decided on a certain structure type you could give me a price range between how much and how much in total to set up an SMSF do you think?

Ashwin: To set up a fund it’s probably going to be between 700 and 1800 depending on if there’s a corporate trustee or not.

Tim: Okay so individual, corporate trustee.

Ashwin: Is a 1200 difference for us. Other firms that might be more or less.

Sonny: Baseline annual cost and now it varies because of investment structure, accumulation versus pension, all those sorts of things but just use what is the bottom end.

Ashwin: Bottom end I would say is 1800, 1800 bottom end per annum.

Sonny: Plus audit costs on top of that.

Ashwin: Plus audit costs are separate, separate unrelated firm, well typically unrelated for most accountants should be doing that.

Tim: What’s an audit generally cost?

Ashwin: Depends on the complexity. Generally, they probably range from about 400 to 1200 bucks depending on the complexity of that fund but you can see and this is i think there was a podcast where we had questions and someone is shooting that it’s all in one package. That’s because they’ve created a platform where all that documentation and compliance is already managed within the fund. The scope can be reduced because they control where the investment’s coming from and the feeds and everything else. Ultimately that would be my guide 400 to 1200 bucks would be an audit cost depending on complexity. Then annual costs range from two plus or 1800 plus depending on what they’re doing in there because the software itself in that 1800, the software cost is probably around two, three hundred bucks and there’s that’s about fifteen hundred dollars’ worth of time which is about four or five hours just to make sure you’ve done everything, get the documents signed, have the meeting with the client, go through it. That would be the cheapest with just term deposits and simple transactions.

Sonny: So Ashwin, I guess for the benefit of the listeners then if you’re considering a self-managed super fund, considering the aspect of not only what access you might get to investments but then the cost benefit analysis of maintaining and holding one, what I’m hearing is at a bottom end don’t have an expectation that it’s going to cost you any less than two and a half to three thousand dollars a year.

Ashwin: Yes.

Sonny: If that worries you or you don’t see value in that in your comparative analysis then it’s probably safe to say you wouldn’t go down that path.

Ashwin: No. I think that’s a rough guide for everyone. You might be able to find other solutions where it comes out cheaper or other accounts might charge more but that’s a fair assumption to look at it from that point of view these are the costs.

Sonny: You’re not prepared to pay that.

Ashwin: It’s probably not right because the whole reason you’re in this well, i would say from my view the whole reason you’d be in a self-managed vehicle is you think you can outperform those costs and what another fund could do for you. If you can’t afford the extra running costs of having an SMSF doesn’t really make sense. Now there are times, it’s very rare when someone’s got a really big balance in another fund and the reason they’ve come to a self-managed fund is just to reduce costs.

Tim: I guess further to those costs you’ve got fees on, transactional fees, investment fees. It really depends on…

Ashwin: The total fees in a self-managed super fund could get up to depending on all those fees could be plus of eight, it could be four, could be three. It depends on what they’re doing. If they’re engaging all those advisors like we’ve mentioned before to get the holistic investment they might be paying close to 10 grand in fees.

Tim: Okay and then what is a self-managed sorry and then what is a self-managed super fund accountant and if they differ from a regular accountant, how is that and what should people be looking for?

Ashwin: I think there is a course, there’s a couple of courses that are directed to being an SMSF specialist. Personally, I don’t know what the real difference is. I think they would do courses to understand a lot more around complexity maybe around maybe age pensions and how they relate to the super funds. Maybe it comes with an AFS cell to give advice on certain things and setups and things like that. I’d say that’s what it’s probably around but i would say that would mean you’re getting better advice. They’ve got undergoing a training and advice structure to do that. That’s probably the difference but I’d probably work out what services you need then ask that question to you, the accountant you’ve engaged can you do that.

If it turns out kind of like me who doesn’t have a financial license and I can’t give you advice in these areas and those are advice areas you need. Well then you need to find another account. I’m not the fit for you. I could recommend you to an advisor to see or other people to see. If that fits the need then great but if that’s not the right fit then you want to go to one place with all of it. Like Sonny said there are accountants and financial advisors in there that work together. They’ve got the whole gamut together. That’s where you want to be.

Sonny: I think Tim, it comes down to if you’ve got a level of complexity to what you’re doing or what you’re looking to do and you can afford it go to the specialist. There’s people out there that have gone the extra mile and I’m talking now from it perhaps an accounting perspective where they’ve got a specialist designation around superannuation and self-managed super funds. If you’re a large scale investor or you’ve got a large balance and you’ve got some complexity and you’re looking at doing certain things and structuring and go to the specialist. It’s probably the simplest way I could say. They take the time and they have the knowledge for the reason. If you can afford it then that’s where you should be.

Tim: Very good. I think one thing I thought of before was just around the whole advice piece and perhaps people’s perception on advisors for whatever reason but I come back to if I was starting a business and I wanted to run it past a friend or an accountant just to see if it would stack up. I would do that. I would go and get advice from a professional before I made that decision to start a business. It’s really quite similar to an SMSF I think. It’s kind of like a business in terms of your involvement and the risks and everything that goes with it. It’s a funny one. The perception around advisors I feel potentially is misguided. I’m interested to sort of learn why that is.

Sonny: I think it’s a good point. If I had to guess why some people are misguided around it probably stems from either prior experiences or misunderstanding of what the industry in terms of the financial advice industry was about. To be really clear you can get advice around establishing a self-managed super fund independently from what you then do inside that self-managed super fund. I think if people have the misconception that advisors charge in a particular way or have different underlying motives that are misaligned to clients when it comes to investment management or otherwise which i think is a historic misconception in some areas then you can get advice around whether a self-managed super fund makes sense for you or not. It doesn’t need to have the follow-on of an advisor managing then or assisting you in managing all your money.

If that’s stopping people out there from getting advice on whether an SMSF makes sense hopefully that’s clear like because I’d agree with you Tim. It makes sense to go out and get that advice. From a very high level point of view let’s look at what that advice is going to entail. It’s just going to be the pros and the cons of a self-managed super fund and how it applies to you, your circumstances and your objectives. Those pros and cons include all of the risks associated. Now, if you were to get objective advice around whether that makes sense for you and your circumstances and your you know personal situation whether or not you implement that or take that advice to Ashwin’s earlier points is completely up to you but to have an objective professional opinion could help you make the right decision or not make the right decision.

Ashwin: Whether you ignored it or not you’ve made an informed decision. I think that’s the big thing. Plenty of times people will ignore advice. That’s to their own pro and their benefit but that’s their call but the prudent thing to do is to get it and sit down and actually have that separate meaning so you’re not rushed into a decision or you’ve gone down this path for some obscure reason that you’re not sure about. It’s a bit dangerous for people to do it themselves that way? I think that that would be my first point around. I think the advice part I think this comes down to what people have experienced more than anything else I think or what they’ve maybe read or have seen in the news. I think that skewed a lot of people in there. From someone that tries to look at things objectively most times I think it comes back to the people you engage. I’m trying to channel Gareth here.

Sonny: I was going to do the same.

Ashwin: Gareth’s experience was not great and as a result he feels a certain way about things. That’s how we all genuinely are. You go well, he really comes back to the things you should ask a financial advisor when you meet him. I think the money smart website’s really good. It’s got a bunch of questions you should ask an advisor in that meeting. Those are the checkpoints. Those are the things you should go through and ask an advisor. At least all those things that are perceptions or experiences you’ve had have been quashed or answered in that meeting. Then you’ve got the right advisor for you because whether you’re working on in every industry there’s always a few people not right for it but those questions being asked and answered are your protection points. That statement of advice. That’s why I would challenge everyone to make sure they do that. That’s your key step before you go ahead and undertake this hopefully a lifelong process and then super fun.

Tim: Very good and I guess just to finish if I was looking for an SMSF accountant or a regular accountant to work with my SMSF. Where should I look? I know there’s three professional accounting bodies which could be a good place to start.

Ashwin: I’ll definitely check the Tax Practitioners Board website. Obviously make sure they’re registered as an accountant with a taxation license. That means that they can actually complete the form and fill out that section in the tax return which is quite handy.

Sonny: Step one.

Ashwin: Step one but then like we said just ask the questions, ask what you’re after but go in with the questions of seeing an advisor first. If you’ve got a statement advisor or you’ve seen a financial planner and you’ve got the detailed advice you are more likely to then ask the right questions when you’re trying to seek that accountant whether it’s the one down the road or one you’re doing your taxes or whether it’s a specialist. You’ll find out what that is based on that complexity of what your super fund’s going to be entailing.

Sonny: I think we’ll put up some links on our website in relation to how you might go around selecting an accountant or accessing those either through those professional bodies or other service providers without any preference to one or the other but we can give some direction in terms of how you’d go about it but i guess to echo Ashwin’s point go and meet and speak to different people. I mean you’re probably considering a self-managed super fund because you’ve heard about them from somewhere or someone, a referral to someone that’s had a good experience with a particular accountant is a good start. The same goes for an advisor or a financial planner but I always encourage people to go and meet a couple because hopefully it is an ongoing relationship that you will need and would want to and should listen to in different points in time. There needs to be a right fit. Yes, make sure they’ve got the credentials that are required and they’ve got the specialty in the areas that you need them to but then go out and have a conversation with a couple of people. I think the best way is to get the best fit for you which will change over time as well but you want someone that you can work with.

Thank you for joining us once again. If you’re interested in our waffle about self-managed super funds, feel free to join us on smsfmate.com.au or search SMSF Mate in Spotify.

General Advice Warning

Sonny Rahim

Premia Private

Sonny Rahim is a finance professional based out of the Greater Perth Area. He is the director and founder of Premia Private, a multi-faceted finance business with advisory divisions and expertise in the areas of Strategic Planning, Wealth Management, Investment Management, Debt and Personal Insurances. Sonny is one of the founders of SMSF Mate.

Sonny studied in the Private Markets Investment Programme at Saïd Business School, University of Oxford and also participated in the Oxford Entrepreneurship Venture Finance. He also completed a Bachelor’s Degree, Commerce (Accounting and Finance) at Curtin University in Western Australia.

As well as being a founder and managing director of the Premia Financial Group, Sonny has worked as an investment fund manager and a chartered accountant. He sits on the board of Ronald McDonald House Charities Western Australia.

You can find out more about Sonny or connect with him on Linkedin here: https://www.linkedin.com/in/sonny-r-rahim-28959333/

Or visit his website here: http://www.premiaprivate.com.au/

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Ashwin Ramdas

Eventum Consulting

Ashwin is an accountant and educator based in Perth, Western Australia. He is passionate about helping family owned businesses and startups. He is one of the founders of SMSF Mate and you’ll regularly see him on our podcast!

Ashwin is a managing owner and director of Eventum Consulting, a multidisciplinary firm helping clients with finance, succession planning and their tax needs. He also served as a lecturer in taxation and small business at the Central Institute of Technology, and has worked as an accountant at a number of well-known tax specialists.

Ashwin studied a Diploma of Business Education and a Bachelor of Commerce in Financial Accounting, Managerial Accounting and Corporate Finance, both at Curtin University, WA.

Ashwin is passionate about technology, and sees it as an enabler for his clients to grow truly sustainable and profitable businesses.

You can find out more about Ashwin or connect with him on Linkedin here: https://www.linkedin.com/in/ashwin-ramdas-72442919/

Or visit his website here: https://eventum.com.au

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