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What is good SMSF reporting?

Good SMSF administration is a combination of good accounting and good administration. This means that the accountant/administrator should do more than just compile the financial statements. Tracking of various other items like components of member benefits are important. Good SMSF reporting should provide the trustee with comprehensive reporting that enable them to quickly see the position at year-end and also use the report for planning.

Often, you will have stated on the Statement of Financial Position 'Shares in listed companies' and/or 'Units in managed investments' with a value attaching to it, and that's it. There are no supporting schedules. This makes it difficult for the trustee to see how their investments performed - there are no cost price and market price comparison. And it makes it even more difficult to plan.

Good reporting practice should include a schedule of what those shares or managed investments are. Ideally, it should contain the units held, cost price and market value. A report that shows the movement during the year would also be valuable.

The benefit of the report is the ability to quickly see that the investments are properly accounted for. The tracking of the units and cost price will ensure that capital gains/loss is accurately calculated for future disposals; this is especially important when there are dividend reinvestments in place.

Member reporting is another area that reporting should be detailed. Do you often wonder what the value of your benefits is? Good reports should provide Member Benefits Statement. The statement will detail contributions made during the year and the type of contributions, profit or loss (return on investment) allocated during the year, and taxes.

It may be detrimental if the member benefits components are not tracked. You may ask what is member benefits component and why is it important?

Why is it important? If you commence a pension before reaching 60, the taxable component of the pension you received is taxable income to you at your marginal tax rate plus medicare levy. The tax-free component is not assessable income.

It may still be important to you if you are over 60. This is because it is even more significant when your benefits are distributed as death benefits. Where the death benefits is paid to a non-dependent (i.e. not a spouse or dependent child), the taxable component of the death benefits is taxed at 15 % plus medicare levy.

Imaging distributing death benefits to a non-dependent without knowing the taxable and tax-free components. It means having to go back on every year's records to determine these components - 5, 10, 20 or even more years of records, if it still exist...

Secondly, tracking of the preservation components is also important. Benefits can fall in 3 categories – preserved, restricted non-preserved, and unrestricted non-preserved. The unrestricted non-preserved portion can be accessed anytime, whereas there preserved and restricted non-preserved can only be accessed when certain conditions are satisfied.

Having the preservation components tracked ensures that you know what your benefits are made up of.

At Superannuation Accounting Services, our reporting are comprehensive and incorporates all the above. Another reason why you should have your SMSF annual accounting and tax done by us. View a sample of our report:

Full set of report

Financial statements only

Investment reports only

Member reports only