Australian (ASX) Stock Market Forum

Self managed super - what are the costs?

Julia said:
Hello Chemist,

And would you believe I read your comment and thought for a couple of seconds "what on earth is chemist on about"! Then woke up. I think I get it wrong every year and have no idea why.

Thanks

Julia


He he - nice one!

Glad to see your efforts were worthwhile Julia. I am having a meeting today with my nice accountant (I have an original nice one who sold his practice to another business, and it is the latest one I have all my issues with :swear: ) to talk about Super Fund strategies - will be interesting to see what he has in mind as a result of the recent budget. He no longer does accounting as such but has an Investment Practice. He only gives us advice as he feels we have a pretty good grip on Investment opportunities but obviously need advice on Tax Issues. It was his idea to start up our own SMSF several years ago, and that was a gem!
 
Do we have any accountants or tax specialists on the forum?

Last year I paid $3300 for the tax return and audit on my SMSF and believe I was decidedly overcharged. There were just Australian shares plus cash in two bank accounts. No property or anything complicated.

Now time to get last financial year's return done. I took the relevant info into an accountant yesterday and got a quote of $700 plus GST.

My question is: can an accountant actually stuff up the tax return and/or audit on a SMSF? It seems pretty straightforward to me but perhaps I'm missing something. In other words, can I trust this much cheaper quote to get me a reliable result?

I'd appreciate any comments from anyone who knows about this.

With thanks

Julia
 
Julia
I wouldnt expect so.
However why not have a second quote and if around the same go with the one with the best credentials.
Personally I would look for one recommended by a client or 2.

I pay a heap for the firm that looks after my Company,personal and super.
However its a value judgement --- based upon tax paid (or not paid) advice when I want it and the quality and effectiveness of that advice.
 
Julia said:
Do we have any accountants or tax specialists on the forum?

Last year I paid $3300 for the tax return and audit on my SMSF and believe I was decidedly overcharged. There were just Australian shares plus cash in two bank accounts. No property or anything complicated.

The fee you pay for the audit will come down to two factors. The time and the risk.

Accountants will charge clients between $150 and $350 per hour worked depending on the complexity of the job and hence the level of staff member required.

The fee will increase with the level of risk the firm perceives to exist in the job. If the fund holds more assets, trades more regularly or holds more inherently risky assets (eg. shares or derivatives compared to fixed interest) the fee will increase.

Ensure you receive a signed engagement letter from your accountant that details the scope of work and the fee to be charged. Whilst the fee may very, if its materially different you will have recourse.

As tech said, the quality of the account is as important than the fee. Do remember though that good staff exist in even the cheapest firms.

The quality of the job will vary. If you’re just looking at the audit as a hoop to jump through to be compliant with SIS (or whatever it is for SMSFs) then any accredited chump can sign it off. If you view an audit as a value adding mechanism for managing your risk just as you would a stop loss on a trade then quality becomes an issue. The risk for you is that the audit won’t detect a mistake and you wind up wearing a fine down the track. As long as the work performed by the accountant met the scope of work and was suitable to substantiate their opinion chances are you wouldn’t be able to make a successful claim against them even if they don’t detect a problem they should have found.
 
Julia said:
Do we have any accountants or tax specialists on the forum?

Last year I paid $3300 for the tax return and audit on my SMSF and believe I was decidedly overcharged. There were just Australian shares plus cash in two bank accounts. No property or anything complicated.

Now time to get last financial year's return done. I took the relevant info into an accountant yesterday and got a quote of $700 plus GST.

My question is: can an accountant actually stuff up the tax return and/or audit on a SMSF? It seems pretty straightforward to me but perhaps I'm missing something. In other words, can I trust this much cheaper quote to get me a reliable result?

I'd appreciate any comments from anyone who knows about this.

With thanks

Julia

Hi Julia

Just a couple of questions. How many shares do you hold in the fund and are they actively traded?

Also - who maintains your trust deed and prepares compliance paperwork for the fund? Is this your accountant or do you have a super adviser?

I haven't got enough time to answer in full at the moment but will try over the weekend.

Regards

Duckman
 
Julia said:
Do we have any accountants or tax specialists on the forum?

Last year I paid $3300 for the tax return and audit on my SMSF and believe I was decidedly overcharged. There were just Australian shares plus cash in two bank accounts. No property or anything complicated.

Now time to get last financial year's return done. I took the relevant info into an accountant yesterday and got a quote of $700 plus GST.

My question is: can an accountant actually stuff up the tax return and/or audit on a SMSF? It seems pretty straightforward to me but perhaps I'm missing something. In other words, can I trust this much cheaper quote to get me a reliable result?

I'd appreciate any comments from anyone who knows about this.

With thanks

Julia


Julia,

I use cash, shares for my SMSF have never paid more then $750 for return and audit combined and I have used 3 diff accountants. $3300 sounds very expensive to me. I've got good grasp of ATO and APRA rules and know my fund is compliant.

Freddo
 
Julia,

I also am not sure who is running your super fund on a day to day basis? Are you doing this yourself?

I have a very basic SMSF with a VERY small amount of funds in it but my fees run on a scaling system dependant on number of investments held. I have less than 3 investments in the fund which cost me $45.10 per month to have run by the accountants. From memory the next three adds $15 a month and so on or something to that effect.

Bearing in mind that it is a very simple fund with very few assets, my aduit fee last year was $165.

Grand total = 541.20 + 165 = $706.20

A couple of months ago I got some fee called ATO supervisory levy, not sure what that is and would be glad if anyone knew.

Cheers
 
clowboy said:
Julia,

I also am not sure who is running your super fund on a day to day basis? Are you doing this yourself?

I have a very basic SMSF with a VERY small amount of funds in it but my fees run on a scaling system dependant on number of investments held. I have less than 3 investments in the fund which cost me $45.10 per month to have run by the accountants. From memory the next three adds $15 a month and so on or something to that effect.

Bearing in mind that it is a very simple fund with very few assets, my aduit fee last year was $165.

Grand total = 541.20 + 165 = $706.20

A couple of months ago I got some fee called ATO supervisory levy, not sure what that is and would be glad if anyone knew.

Cheers

Hi Clowboy,

The ATO supervisory levy is an annual fee ($35 from memory) which is payable to the ATO. It doesn't affect what you pay your accountant or auditor.

Thanks for info re what you have paid on your fund.

Julia
 
Duckman#72 said:
Hi Julia

Just a couple of questions. How many shares do you hold in the fund and are they actively traded?

Also - who maintains your trust deed and prepares compliance paperwork for the fund? Is this your accountant or do you have a super adviser?

I haven't got enough time to answer in full at the moment but will try over the weekend.

Regards

Duckman
Hi Duckman,

Currently there are 21 companies. There are two bank accounts: An E-trade online trading account and a separate ANZ which feeds into and out of the online account.

In the E-trade account during last financial year there were 46 transactions, either Buy/Sell or Interest.

In the V2 ANZ a/c there were 88 entries -= dividends and interest plus the odd subscription etc cheque.

Would be very appreciative of your comments.

I have had another quote which was $1900 inc. GST. I am just puzzled by such a large discrepancy and hope that if I go for the cheaper version the accountant can't "stuff it up". I'm pretty ignorant about the ATO's requirements but believe that the audit in my case is more a formality than anything else. There is just nothing complicated about what I do with the Fund.

Thanks very much to everyone who has offered their opinion.

Tech: you have a much more complex situation than I do. In your case, I can understand that you will happily pay for advice that will make you and your business more profitable. That's not what I'm looking for or expecting to receive. I just want an ATO compliant tax return and audit.

I have had assurance from the ATO in the past that the Fund is complying.

Julia
 
Freddo said:
Julia,

I use cash, shares for my SMSF have never paid more then $750 for return and audit combined and I have used 3 diff accountants. $3300 sounds very expensive to me. I've got good grasp of ATO and APRA rules and know my fund is compliant.

Freddo

Thanks Freddo. That's reassuring.

Julia
 
I wouldn't say I am an expert in this area but I have completed quite a few SMSF audits in the past so I can speak more on the audit side of things rather than accounts preparation.

In my opinion, if you are being charged $700 for accounts and auditing the accountant isn't doing a thorough job. The firm I worked in previously was large enough to audit its own funds (with chinese walls, which worked very well in our case) and the minimum we would charge for an audit was $500. On top of this there were accounting fees of at least $1000 up to $2,500 for a fund with shares, managed funds, property, private unit trusts, term deposits and first mortgages. I would say this firm was expensive, but a thorough and accurate job was done....yet while auditing these SMSF we still found errors. (I know that sounds contradictory, but there are so many little things that can be wrong)

At one stage we audited some funds for another accounting firm that had previously audited their own funds and decided they wanted to outsource the audit. They were doing account and audits for around the $700 figure. Now when we were auditing these funds we were finding many errors, some basic and some not so basic. In my opinion, I didn't think that these funds were being prepared correctly, and we spent a lot of time chasing up information (which was hard to get from the accountants) and a number of the funds were not complying with the SIS act. In the past, the $700 would have been just to prepare the accounts, and I doubt anyone would have actually looked at auditing the fund, they just presumed the accountant did a good job. We also found that a lot of these trust deeds were not up to date and that they no longer complying.

To give you a bit of a back ground of the work that is involved with auditing a fund we had 2 main activities, checking that assets exist and are owned by the fund and make sure income and expenses are correctly stated. These were the 2 most time consuming parts, although there were a lot of other smaller things too.

Checking assets: If you hold about 20 shares we would take a random sample of about 7 shares. For each share we would check the shareholder is correctly stated ie XYZ Pty Ltd As trustee for XYZ superannuation fund; dividend income; confirming dividend income banked into the funds bank account or DRP; shareholding at 30th of June (going to share register website and confirm this, if not able to confirm online call the share registry); the change in market value is correct and citing sale or purchase documents if either of these occured.

Bank accounts: check the bank account holder's name as above; check to make sure the bank balance didn't go into credit for the year (ie less than $0) and check money going out of the account to ensure it is for purposes relating to the fund.

Land/ property: Do a land title search to confirm land holders name and to ensure that there are no encumberances or covenants over the title (eg is it used for security with a bank); citing lease agreements to confirm rent paid; confirm rent paid into bank account; is correctly valued (updated every 3 years as prospector stated) and checking expenses to documentation.

As you can see just from checking assets, if a thorough job is done it is quite time consuming. If we find something wrong, that is even more time consuming because sometimes changes need to be made, letters written to the trustees and to the ATO. There were also extensive reviews, my work would be checked by my team leader, which was then checked by the audit partner.

In my time working with SMSFs I saw good and bad from them. If you were actively involved, traded in mainly shares or direct property the funds peformed well. However others would invest a lot of $$$ in managed funds which defeats the purpose of having a SMSF, you pay fees to the investment manager as well as to the accountant, you are much better off to have a super fund with BT, Colonial or an industry fund. I often felt clients were pushed to SMSF to generate more income for the firm, not for the well being of the client.

Personally I will be looking at an SMSF in the next 2 years, although my balance won't be all that high (20k) I can prepare the accounts myself and just need to pay someone to audit the fund, but by directly investing in shares I feel I will be able to outperform my current industry fund.

I hope that helps a few of you, I can provide some insights into the accounts preparation if people are interested in that also, although its not all that different to the audit, just prepare the information needed for the audit. Please note that none of this information is advice, just my opinions of what I have seen while auditing SMSFs.
 
deftfear said:
In my opinion, if you are being charged $700 for accounts and auditing the accountant isn't doing a thorough job. The firm I worked in previously was large enough to audit its own funds (with chinese walls, which worked very well in our case) and the minimum we would charge for an audit was $500.

At one stage we audited some funds for another accounting firm that had previously audited their own funds and decided they wanted to outsource the audit. They were doing account and audits for around the $700 figure. Now when we were auditing these funds we were finding many errors, some basic and some not so basic. In my opinion, I didn't think that these funds were being prepared correctly, and we spent a lot of time chasing up information (which was hard to get from the accountants) and a number of the funds were not complying with the SIS act. In the past, the $700 would have been just to prepare the accounts, and I doubt anyone would have actually looked at auditing the fund, they just presumed the accountant did a good job. We also found that a lot of these trust deeds were not up to date and that they no longer complying.

Hi Julia

Back again - good points by Deftfear.

I'll start by talking about the audit. The auditor of a SMSF is required to prepare an audit strategy before commencing the audit and takes into account likely risks and the level of auditing required for the size of the fund. In essence there are two audits within each fund. Firstly the audit of the financial statements and secondly the compliance audit of the fund.

To audit a SMSF an auditor needs to review the following: Financial Statements, Income Tax Returns, Investment Confirmation (Property,Managed Fund and Share Price valuation), Employer Confirmation of Contribution, Bank Statements, Insurance Policies, Calculations of Capital Gains/Losses, Review of Investment Strategy, Review of Trust Deeds, Actuarial Reports, to mention the majority (and I understand that some of those like Actuarial Certificates don't apply to all).

I will give you an idea of the "expectation gap" that can exist between those running SMSF and auditors. Most people think they just need to have a investment strategy and that the auditor just needs to sight it. Wrong. Yes, the auditor must sight the strategy, but then he/she must determine if it is a suitable strategy for the "primary purpose of retirement" and then review the fund to see that it is inline with that investment strategy.

The auditors must also review all the minutes prepared by the SMSF including all supporting documentation to support purchase/sell decisions. (These are the things that the ATO are looking at when undertaking audits of SMSF)

But here is the kicker. You may have heard the term "Principle of Materiality". This is an accounting term that comes into play when determining whether something is substantial or "material" enough to be reported on by the auditors in their report. Unlike most audits - when auditing a SMSF the auditor does not have the discretion to let breaches go, however small. They are technically supposed to be reported to the ATO. The SIS Compliance checklist for the auditor to review is quite comprehensive.

You might ask "why have the ATO come down so hard?" There are a couple of reasons. Firstly, SMSF's have exploded over the past 5 years. Mums and Dads who previously knew nothing of running a super fund have suddenly been thrown in as masters of their own retirement monies. Before being run by the ATO, small SMSF's had to report to APRA - who were toothless tigers. There was all sorts of cowboy stuff happening - Ferrari's being purchased in fund names for private use, beach houses bought for use of fund members, loans from the super fund to members etc. The ATO took over from APRA and immediately did their own research. They were appalled to find the level of non-compliance issues among the SMSF's. The ATO were equally appalled at the clean audits being signed off on when issues were clearly reportable. So they set about trying to get the funds back in line.

There were two ways to do this - firstly audit all the SMSF themselves. Now for a resource strapped outfit like the ATO that was not possible so the next best thing is to get the auditors to do their job in the first place!

As for the cost of this - I agree with Deftfear. If you are getting an audit for less than $250 I think the level of work is potentially questionable - for your fund in particular Julia. Make sure that you get a separate account for the audit (although this is more a problem for your accountant).

One way accountants have tried to keep a cap on fees is to "do the audit" at the same time as preparation of the financial statements. The ATO are now looking very seriously at this issue. If the Practice is big enough the ATO will allow "Chinese Walls" within the one office but the days when one and two partner practices both prepared and audited the statements are on the way out.

As for the cost of having your accounts prepared there are a number of things that you can do to assist to reduce the cost. Firstly find out from your accountant what software program they are using and see if they would like you to write up a cashbook, prepare an excel spreadsheet, or use an accounting program. In a lot of cases it is easier for the accountant to code straight from bank statements so a short written summary for each transaction is needed. Sure you have software that calculates the capital gains and losses by I will guarantee you that you accountant will calculate it again anyway. Firstly thats his job, and secondly the software doesn'yt always calcualte correctly - or more accurately "the user of the software doesn't calculate it correctly". If you can prepare a summary of all dividends,buy/sell transactions - that would help. Also make sure you have an orderly folder for all your share paperwork - in alphabetical/or chronological order.

Also ask if things like Trust Deeds are looked at for compliance purposes. Ask if minutes are typed up if needed. I would expect that your fund would cost about $900 - $1500. Just my opinion. Price is certainly a consideration but the cheapest price isn't necessarily the best outcome for your fund - I might add neither is the most expensive quote!!

The other thing to be careful of is - gossip. There will be a heap of people on the forum that will say they get their SMSF audit and accounts done for $700/$800 and have no problems. That's great but everyone is different. You will get very good accounting firms for $800 and you will get some real sharks for $4000. My only comment is that the "real bargain" accountants out there, doing a fantastic job for $700 are in the minority in my opinion. You need to compare apples with apples - some funds are Defined Benefits not Accumulation, some only have managed funds, some have 50 shares v 5 shares, some actively trade others sit and hold, some have had 10 buy back arrangements throughout the years others not one, some are in pension phase, some have property which requires valuing and the list goes on. It is a little bit like saying my next door neighbout got a tax refund of $2000 and I only got $300 - he works at the council, has a wife and two kids our refunds should be the same!! Doesn't work that way.

One more thing - Australia operates on a "self assessment" tax system. Many people think just becasue they lodge their returns the ATO are approving and accepting their ITR's. Wrong. You can put anything you like in your ITR - it is only when the ATO come around to reviewing your return that the house of cards comes tumbling down.

Hope this has helped.

Regards

Duckman
 
Deftfear and Duckman

Many thanks to you both for such detailed and helpful comments.

I have some reservations about how capable the $700 accountant would be just from the general conversation plus his assurance that there would be no problem in him doing the audit as well, in view of the fact that he appears to be a one man band.

The other quote I have is from an accountant with a good reputation and in whom I would feel confident - $1900 incl GST.

I'm just astonished that there can such huge variation in cost: $3300 last year, $1200 the year before that, and now a choice between $770 and $1900.

My appreciation to everyone who has offered their opinion.

Julia
 
:( I cant believe it has come to THAT discussion again so quickly Julia

My life is flashing before my eyes!

I think you are wise staying away from the cheaper person - I thought the only people authorised to do audits were totally independent, or those companies who have an independent auditing arm separate from the accounting practice.

I believe I make it too easy for my accountants - eg
Bank statements for 2 Bank accounts are all reconciled with detailed 'cheque' stubs through MYOB

Share buys and sells, dividends, and CGT is entered into My Portfolio Planner (access based spreadsheet), which I then print off - all calculated for them; all buy/sell statements provided in PDF,
I print off the Portfolio Management Statement from NAB online which details the name of the entity (ie the Super Fund) and the value as at 5pm 30th June
Copy of Land Title document,
and they still charge me $3000+ :banghead:

Maybe I need to give them some angst!

Have lodged my info with them last week, will see how it goes!
 
Prospector

I guess your providing them with those completed details doesn't actually save you any money because they are going to have to go over all of it themselves anyway and enter the info in whatever format they are using.

Did you ever come to a final agreement about payment for the last one?
I recall that you paid them a certain amount but not all of it?
Did you get a quote for this year's?

Julia
 
Agreement might not be the right word to use Julia. For the Super Fund return I paid their bill; but for our company returns and personal returns I paid them what I thought based on the time taken and detail involved. This amount to just over half of their invoice! They banked the cheque; we later had a meeting to discuss it and I guess I wouldnt budge! And that was the last I heard!

Does your new Accountant want to obtain copies of the the Super Trust deeds etc etc? I approached another accountant and they wanted me to do all the chasing up, so inertia set in and stayed with my current ones. Call it a love/hate relationship I guess! :eek:
 
Prospector said:
Agreement might not be the right word to use Julia. For the Super Fund return I paid their bill; but for our company returns and personal returns I paid them what I thought based on the time taken and detail involved. This amount to just over half of their invoice! They banked the cheque; we later had a meeting to discuss it and I guess I wouldnt budge! And that was the last I heard!

Does your new Accountant want to obtain copies of the the Super Trust deeds etc etc? I approached another accountant and they wanted me to do all the chasing up, so inertia set in and stayed with my current ones. Call it a love/hate relationship I guess! :eek:

Well, that was definitely a win to you, Prospector. You must have studied "Assertiveness 101"!

Did the potential new accountant want copies of the Trust Deeds etc?
Well actually that is one of the reasons I'm hesitant about him. I said that I had uplifted all that from the previous accountant and could make it available to him, and he just waved the idea away and suggested that was quite unnecessary. He also saw no need to even look at my Investment Strategy and said "I'm sure you have something that's more or less OK".
You can understand perhaps why I think it might be better to pay someone else a bit more?

Can someone, maybe you Duckman, explain the difference between a CPA and a Chartered Accountant, if any.

With thanks

Julia
 
Julia said:
Can someone, maybe you Duckman, explain the difference between a CPA and a Chartered Accountant, if any.

With thanks

Julia

Oh dear Julia!! I get the feeling I am about to open Pandora's Box. But here goes.

The CPA's (Certified Practicing Accountants) and CA's (Institute of Chartered Accountants) are the eminent accounting bodies in Australia. CPA's outnumber CA's in the ratio of about 5:1.

About 5 years ago there was a vote by the two bodies to merger that was overwhelmingly supported by one membership group and overwhelmingly rejected by the other membership group. So many resources are currently being wasted by having two major accounting bodies that are doing effectively the same role (liasing with ATO, being on government policy boards, lobbying, professional development etc) however the problem was that after the merger both groups would have had the same status. Which was not on!!

Put simply - it is easier to become a CPA than a CA.

To commence your CPA studies you need to have completed an undergraduate degree. You can be employed or unemployed. Candidates need to complete 5 subject topics. The exams are multiple choice only and there are no assignments or workshops that candidates need to attend. You are able to do as many subjects at the same time. If you are a CPA you are not eligible for automatic CA status.

To commence your CA studies you need to have completed an undergraduate degree. You need to be employed in an accepted workplace (ie a chartered accounting firm or a company that has been accepted by the Institute of Chartered Accountants such as BHP, Rio, Westpac etc). Basically you need to have a CA mentor. There are 5 modules to complete involving both written assignments, speaking presentations, workshop participation and final exams, of which only 20% is multiple choice. It is impossible to do more than one module at a time. You need to pass all areas to pass the module. If you have your CA badge you are eligible to apply for CPA membership. Due to the more rigorous testing less people undertake it. The CA program used to be called "The Professional Year" - even though it took at least 18months (yes they are "Number One in Numbers" :D )

One thing that the CPA's do much better is market themselves. As a result most people don't know the difference between CA's and CPA's - and worse - they think that CPA's are more qualified!!! This is a real frustration for CA's. There has been a big push in the past few years to educate the public but there is a lot of ground to make up. More members mean more membership dollars and more advertising and the CPA's have done it well.

Don't get me wrong - there are good and bad CA's and CPA's - I'm just saying it is more difficult to achieve the status of CA in my opinion.

There are other bodies such as NIA's (National Institute of Accountants) but I won't confuse the issue.

Regards

Duckman
 
It might be worth looking into something like MLC's (http://www.mlc.com.au) Masterkey Custom SMSF product. I'm not sure what their fees are like but they provide web access to your superannuation portfolio where orders can be input to buy or sell anything on their investment menu which includes ASX listed shares, hundreds of managed funds and some unlisted securities. You can also transfer assets like property directly into the fund.

They take care of the accounting and audit functions for you.

The big draw back is they require you to open the fund with the assistance of a financial advisor who of course will want to charge you a fee.
 
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