The Latin phrase “Caveat Emptor” or “let the buyer beware” should certainly be used far more often in the SMSF market, particularly for those enticed by cheap administration offers.
Unlike managed investments one of the benefits of a SMSF is the lower running costs as fees are generally fixed. Therefore the administration on a basic SMSF (with minimal advice requirements) could be as little as 1.4% based for example on a $200,000 fund. And if you were to increase the fund, the percentage comes down even further! The administration (i.e the annual accounts, SMSF tax return and SMSF Audit) is often managed by a qualified accountant and an auditor.
The accountant gets to personally prepare the SMSF accounts and at the same time can cast their eye over and look at opportunities for tax advice and compliance issues. Usually the accountant will have an existing professional relationship with the client and can consider their personal circumstances for future strategies.
However, with SMSFs now becoming more of a commodity item there is an influx in cheap SMSF compliance and administration offers which for the layman may end up costing more than anticipated.
What to watch out for in cheap SMSF administration:
- Is the service being completed offshore?
- Is the process automated?
- Is a qualified accountant involved?
- Will there be suggestions for tax strategies?
- Will they keep you informed of legal changes?
- What happens if something goes wrong?
- Do they handle non-compliance issues?
- Who owns the service provider?
There are many issues to consider when using a cheap SMSF administration company rather than a dedicated accountant. Especially when lodging a SMSF tax return as the forms can trip up even the most educated. Using a qualified accountant for your SMSF administration will almost always produce a better tax outcome than a computer programme or offshore processing. They are able to consider the personal circumstances of the client, their ages and present and future tax strategies. They are more likely to pick up any errors and work with the auditor and ATO for resolutions.
If you think you have the time and expertise to look after your own SMSF then great, but if you want to have peace of mind and certainty that you’re in good hands then don’t worry about saving a few extra dollars.
Like most things… you get what you pay for.