If you’re a trustee of a self-managed super fund (SMSF), you have significant responsibilities when it comes to managing the fund’s finances. Proper accounting and record-keeping are crucial to meeting your legal obligations and avoiding penalties from the Australian Taxation Office (ATO). Here’s what SMSF trustees need to know about accounting and record-keeping:
– Maintaining accurate financial records is a legal requirement for SMSFs under the Superannuation Industry (Supervision) Act. This includes keeping detailed records of all transactions, income and expenses, assets/investments, and liabilities.
– Good record-keeping helps you easily track the fund’s financial position. You need to know what assets the SMSF owns, the value and performance of investments, what expenses have been paid from the fund, and the super account balances of members.
– Accounting records must be updated at least annually and audited each year by an approved SMSF auditor. The annual audit helps ensure the fund is compliant with super and tax laws. Failing to undergo an audit can lead to severe penalties.
– The ATO requires SMSFs to keep records for at least 5 years. Significant administrative penalties can apply if your record-keeping does not meet requirements.
– Keeping orderly records makes tax time easier. Come tax time, you need to lodge an SMSF annual return which relies on accurate accounting documentation. Missing or poor records can expose trustees to penalties.
– Good record-keeping aids succession planning. If a trustee leaves the fund, it’s crucial that complete histories of financial decisions and activities are available to successor trustees.
In summary, maintaining meticulous accounting and records is vital for SMSF trustees to satisfy legal duties, avoid hefty ATO penalties, simplify tax reporting, and enable smooth transitions between trustees.