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Self Managed Super Fund (SMSF) Article
Professionals on hand to keep SMSFs running

By Tony Negline.

This article may be out of date.

3rd November 2010

This column is regularly asked what type of people are involved in running a Self Managed Super Fund.

In theory a SMSF only needs a trustee and members (who in many cases are the same people) or beneficiaries.  If no outside professionals help run the fund then the trustees must actively administer the super fund according to the fund's trust deed and relevant legislation themselves.  For example the trustee would have to prepare the fund's accounts and prepare and submit its annual return to the Tax Office.

In reality hardly any Self Managed Super Fund trustees actually run their fund by themselves.  Most rely on one or more professionals to ensure their fund continues to run smoothly.  So what professionals might be essential and what do they do?

Well here's a list in alphabetical order:

• Accountant – this person prepares the fund's financial accounts
• Actuary – will perform complex calculations for certain types of super funds such as those small super funds paying defined benefit pensions; if required will review the financial soundness of a super fund; will provide a certificate to ensure pension assets are exempt from tax
• Administrators carry out all day-to-day operational requirements such as recording transactions, statements, bill paying, bookkeeping and preparing member statements and storing minutes of all meetings; often works closely with everyone involved in fund transactions to make sure they are completed correctly
• Auditors check that the operation of the fund is good and confirms the accuracy of the financial accounts as well as the work by the accountant and administrator are correct; checks to make sure there have been no breaches of the super laws.  Every super fund, including those that do not employ any other professionals, must appoint an external auditor
• A custodian performs clearing, settlement and safekeeping of assets and investment administration; custodians are not used by many Self Managed Super Funds
• An investment manager will invest funds on behalf of the trustees; for SMSFs this will often be a financial adviser licensed through ASIC
• Solicitors draft all legal documents including a fund's trust deed, draft trustee minutes for complex matters, help drafting documents to put in place more complex transactions, provides legal advice in relation to proposed transactions or activities
• Tax agent prepares various regulatory returns, such as tax returns.

As you might have guessed, or you might know from your personal experience, the same person or organisation might perform more than one of these roles.  For example often a fund's tax agent will be the same person as the fund's accountant who is also responsible for administration.  In many cases that same office is also responsible for auditing the fund's accounts.

Actuaries and auditors have statutory obligations to report to the Tax Office any serious breach of the super laws that they find and the trustee has not done anything to correct the breach or refuses to fix up the breach.

The next issue is the government regulators who look after super.

Obviously the ATO looks after all Federal Government taxation issues.  State and Territory revenue offices look after the collection of duties and fees payable on transactions conducted in their jurisdiction.

ASIC’s job is to look after the operation and disclosure of certain financial products.  It’s regulatory oversight only extends to the conduct of market participants which ASIC has authority to oversee.  ASIC also regulates people who offer or recommend certain products.

This list of products specifically includes many investments which are used to generate capital growth and income for SMSFs, such as managed funds and ETFs.  It also has supervisory power over the ASX.  However there are plenty of products which aren’t regulated by ASIC, for example, real estate and collectibles.

There are plenty of people who ASIC has no power to regulate.  For example, ASIC has no power to regulate lawyers, auditors or actuaries if they are merely doing their professional jobs.  (If these professionals did something which is construed as offering or recommending a financial product or providing a financial service then ASIC might have the power to take some action.)

APRA on the other hand is a prudential regulator.  APRA’s job is to ensure that the money given to market participants is safe.  APRA performs this task for banks, life insurance companies, managed funds and all super funds except Self Managed Super Funds.  Many investments SMSFs make will be with companies supervised by APRA.

Self Managed Funds are regulated by the ATO.  This means the ATO has a dual role in relation to small super funds, namely tax and supervisory.  The ATO does not perform a prudential regulatory function for Self Managed Super Funds.  Its job is to ensure that SMSFs comply with the relevant super laws.

Finally the RBA has a relatively minor (but obviously very important) role to play in relation to SMSFs.  It works closely with the Payment Systems Board to regulate the economy's payment settlement systems.

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