SMSF software: Better records, fewer year-end headaches

Some SMSF trustees use dedicated software to take on more of the fund’s administration themselves, engaging professional service providers for work the software cannot replace. This does not remove the trustees’ responsibility for the fund’s overall compliance obligations.

Class Super is another dedicated SMSF administration platform. It is licensed to accountants and other wealth professionals to manage their clients’ funds, rather than directly to trustees. If your accountant or administrator uses Class, ask whether they can give you secure online access to your fund information and what you will be able to view or do.

Or it could be that you are simply looking for a software solution to record transactions that take place within your fund. This is where some SMSF trustees opt to use products like MYOB or Xero.

With a separate accounting file for your SMSF, MYOB and Xero can help you:

• Record money coming in and going out, such as bank interest, investment income and fund expenses.
• Reduce manual entry through bank feeds, where supported. Transactions from a connected bank account are imported into the software, ready to be matched to existing entries or used to create new ones. Importing a bank transaction does not, by itself, mean it has been correctly recorded in the fund’s accounts.
• Automate routine classifications. Depending on the product, bank rules can suggest or create entries for recurring transactions and help match payments to entries already recorded. Review and approve the results where required, and correct misclassified transactions or allocate any that remain unassigned.
• Check the records against bank statements and, where the product allows, give your accountant access to the records you have maintained.

These software solutions help SMSF trustees keep the fund’s day-to-day financial records organised and reduce manual entry by importing transactions and classifying routine receipts and payments. But, importantly, recording a transaction is not the same as completing its SMSF accounting and tax treatment. These are quite separate issues.

These general accounting software solutions should not be mistaken for a complete SMSF administration system. Trustees should agree with their SMSF accountant how investment, member, pension and tax records will be maintained, and continue to check entries and retain supporting documents.

Before committing to a software product, check how it fits your fund, including which bank and investment accounts are supported and what document storage and reporting are included.

Finally, confirm the total cost, including optional services and how you can export your records if you change providers.

Keep the evidence, not just the numbers

A transaction feed is useful, but it is not the whole record. The ATO specifically states that bank data feeds do not replace bank statements for the annual audit. Statements help the auditor verify account ownership, the year-end balance, and the completeness of the feed.

Keep relevant invoices, investment statements, contracts and other evidence alongside the accounting entries, so each transaction can be explained.

Decision-making needs its own paper trail. Retain trustee minutes and resolutions covering matters such as investment strategy reviews and pension commencements or commutations.

Know your retention requirements

The ATO sets different minimum retention rules and time frames depending on the record. Key examples include:

• At least five years: Accounting records explaining the fund’s transactions and financial position; annual operating statements and statements of financial position; lodged SMSF annual returns and supporting tax documents; transfer balance account reports; and records documenting benefit payment types and the accounts used.
• At least ten years: Trustee meeting minutes and decisions; records of trustee changes; trustee declarations; written consents to act as trustees; copies of reports given to members; and documented decisions about storing collectables and personal use assets. Trustee declarations must be retained while the person remains a trustee or director of the corporate trustee, or for ten years, whichever is longer.

Keep the trust deed, amendments and other enduring fund records in a separate permanent-document folder, and check with your SMSF professional before disposing of older files. The five- and ten-year periods above are minimums, not automatic deletion dates. Corporate trustees must also retain relevant Australian Securities and Investments Commission (ASIC) company records. Electronic records must remain in a form the ATO can access, understand and verify, and records must be kept in writing and in English, or in a form that can be readily converted into English.

Build a simple, repeatable routine

Set aside time each month to upload new documents, review transaction classifications, compare the software’s bank records with bank statements and follow up on missing evidence.

Keep final signed documents clearly separate from drafts, and record trustee decisions when they occur rather than reconstructing them at year-end.

Protect access with multi-factor authentication where available, individual logins and permissions appropriate to each user. Maintain a secure backup or export independent of the main software platform and periodically test that older documents can be opened.

Outsourcing administration does not remove the trustees’ responsibility for ensuring proper records are maintained. The routines above help trustees meet that responsibility.

The bottom line

The most useful SMSF software is the system you use consistently. Pair it with organised supporting documents and timely trustee records, and you will be better prepared to explain your fund’s activities, not simply report its balances.