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Self Managed Super Fund (SMSF) Article
Compliance errors solved for Self Managed Super Funds
By Tony Negline.
This article may be out of date.
9th February 2010
Is the Achilles heel of most Self Managed Super Fund administration processes that they only review a fund many months after the end of a financial year and therefore a long time after regulatory errors are committed?
John McIlroy, who is Chief Executive Officer of Sydney-based SMSF administrator, Multiport Pty Ltd, believes this is the case.
He has designed his office procedures to provide ongoing compliance monitoring. He achieves this by taking nightly downloads from a range of sources and then reconciling and reviewing all data for unusual activities. In this way Multiport can begin to solve compliance problems very soon after they have occurred or stop a regulatory breach before it's finalised.
"The greater the time between a super law breach occurred and when it's identified often makes it harder to unwind it," McIlroy said. If the mistake cannot be undone then the potential for regulatory penalties is greatly increased he said.
This desire for ongoing monitoring means that Multiport clients must use a range of transaction accounts with Bankwest, Bendigo and Adelaide Bank or Macquarie Bank. McIlroy says he would be happy to accept a wider range of transaction accounts but other providers do not offer nightly downloads of transaction data.
McIlroy started Multiport in 2000. It's now fully owned by AXA Australia after it became a shareholder in 2005.
Multiport provides administration, reporting and compliance services to about 1,400 Self Managed Super Funds throughout Australia. It employs 25 full-time equivalent staff and there are no plans to open additional offices or to move any administration functions offshore.
He says that their computer systems which are a mix of some off-the-shelf super administration software and of some internally developed systems could deliver these services to a much larger number of Australia wide SMSFs.
These systems are also used to provide portfolio administration services for non-superannuation Managed Discretionary Accounts.
Multiport is licensed to provide advice on a wide range of financial services products but does not advise their trustee clients how to invest their super fund's money.
Most of Multiport's clients come from licensed financial advisers and a small number of accountants. McIlroy says that between 10 – 15% of SMSFs have either found his business directly or have continued to use the company after ceasing to have an association with the adviser who originally recommended Multiport.
The average profile of Self Managed Super Funds using Multiport is two members who have an average age of between 50 and 55. The average fund size is $880,000. Thirty percent of their small super funds have corporate trustees.
"Basically our average client's set of circumstances reflect similar averages that the Tax Office gets from its SMSF data," McIlroy said.
A typical Multiport administered Self Managed Super Fund invests 80% of its money directly into the Australian stock market and most of these super funds have only a small number of stocks.
Multiport charges its fees monthly based on the total value of assets in a super fund. For example super funds with assets of up to $250,000 pay $2,340 per annum ($195 per month). Those super funds with between $1,000,000 and up to $2 million in assets pay $3,840 per annum.
These fees provide ongoing compliance, administration and all reporting. It does not include the annual external audit. Super fund trustees can either chose from a Multiport created panel of auditors, which charge between $330 and $550 to review a fund. Alternatively trustees can appoint their own auditor.
Multiport is often asked to take over a Self Managed Super Fund from an existing administrator which is typically a small accountants practise. Over the years McIlroy has had to fix some significant super law breaches when these funds have arrived in his office.
When asked why Self Managed Super Funds are popular, McIlroy says simply that members want to be control of their own money.
He believes the Cooper Review (the review into the structure, efficiency and governance of the super sector) will not seek to make it harder to run Self Managed Super Funds.
The Ripoll Committee's review of financial planning advice proposed the establishment of an independent Professional Standards Board. McIlroy thinks that if the Government accepts this advice then the Board's role could include creating appropriate standards for people who provide services to the small fund sector.
In relation to tax reform, and in particular the Henry Tax Review, McIlroy thinks we could see the tax exemption on pension funds removed. It will be interesting to see if this prediction is true and, if so, if the government will accept it. This idea would make super fund administration simpler but what compensation would be offered for the loss of this important tax concession?
Further details about Multiport can be found on their website – www.multiport.com.au
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