Preparing your own Self Managed Super Fund (SMSF) Tax
This is an idiots guide (I’m the idiot) to preparing your own SMSF tax return.
BUT wait there’s more, a free SMSF tax and CGT calculation spreadsheet, that’s worth every cent you’ll pay for it!
I’ve prepared by own SMSF accounts and tax return for the last couple years and will be doing so again this year. This time around I thought I make some notes on the process to help or perhaps hinder anyone else considering preparing their own tax filing.
You don’t need to be an accountant to file your SMSF tax return. Though you must have your accounts and tax return audited. Auditors charge around $275 – $400 a year. Before you consider preparing your own tax you should consider whether it is worth the time and aggravation to do so. Plus consider the consequences of mucking it up, as the ATO is apparently taking a harder line with SMSFs these days. If your only aim is to save a thousand dollars then I don’t think you’ll get a good return on your time and aggravation.
If you love constantly expanding the boundaries of your knowledge and believe no-one knows your affairs or will take better care of the better than you, then preparing your own return may be worth your time.
The news on the street is that preparing SMSF tax returns is difficult. That has not been my experience, in fact compared to our discretionary trust or personal tax returns it is easy. Preparing the accounts is a little more difficult, but it’s got nothing on doing a down forward facing dog.
Let’s get started. Grab these documents from the ATO.
- Self managed superannuation fund annual return 2009
- Self managed superannuation fund annual return instructions 2009
- Capital gains tax (CGT) schedule 2009 (nat 3423) If you have capital gains or losses of $10k or more and there are other schedules you may need, but I don’t. Check out pages 51-52 of the guide for more information.
Before we go on keep in mind that I am not an accountant and have never played one on TV or in the movies. I’m not offering any advice and if it appears that I am then that’s your mistake and you need to adjust your lens.
Now go have a read through the Guide with a highlighter at hand. That’s what I’m going to do now, so let’s get back together once we’ve read it.
Here’s some key points.
- X in boxes, black pen CAPITAL letters
- The guide says the due date for lodgement is 31 October 2009, but my letter from the ATO says 28 February 2010. Confused? Welcome to the wonderful world of accountants. A place where overly complicated is never complicated enough. While you and I may think a date was a pretty simple thing here is what the ATO say. “returns, statements and schedules are set out in the ‘legislative instrument’ which is registered on the Federal Register of Legislative Instruments. This can be viewed at www.frli.gov.au For SMSFs, the due date for lodgment as specified in the ‘legislative instrument’ is 31 October 2009. Most SMSFs will have a different due date…” What the? This is the date, but you’ll have a different date!
- Keep your records for a long time! I keep mine electronically with backups stored in another location.
Next Up Filling in the Return
Section A Fund information.
If you need help on this page then STOP reading now, it’s your basic details and the auditor’s details. The only trick question is the Professional Body code for the auditor. Despite my dig at the ATO, they actually try hard to make these forms as easy as possible to fill in and if you RTFM you shouldn’t have too many problems. In this case Table 1 on page 5 of the guide lists the codes.
Section B Income
We’re off an running. You may now want to grab this spreadsheet I whipped up, or not.
Screenshot – Click to enlarge
DOWNLOAD FREE SPREADSHEET
This is where it gets tough for me to explain what you should do, so I’ll simply say what I do. This year I’ve jettisoned my Excel spreadsheet for GnuCash, a free double entry accounting system. So I run the profit and loss report and copy the numbers from there into the appropriate cells on my new wizz bang CGT and SMSF tax spreadsheet.
Our super fund tax is straightforward. Interest, dividends, capital gains tax on share sales on income side and auditor fee and some management /admin costs for expenses and a little bit of ABN not quoted tax withheld for a deduction.
I first calculate the CGT, by copying the details from GnuCash into my CGT spreadsheet. Copy totals for CGT Discount, Other (i.e. short term CGT), Losses and any carry over losses which I don’t have. The spreadsheet then applies the losses against the gains and calculates the Net CGT or any carried forward losses.
The net CGT is copied to box A, Net capital gains and we’re now at a sprint.
Next copy all other income from GnuCash. For us that’s interest, franked dividends, franking credits and trust distributions from a managed fund, employer and personal contributions.
Section C Deductions. Copy all the expenses from GnCash to the deductions. For us, this is auditors fee and admin expenses.
Section D Tax Calculation. Enter your offsets and credits. For us that’s some ABN not quoted and franking credits.
Section E Losses. If you have losses enter them here, if there are net capital losses they are copied from the CGT sheet.
Section F Member Information. Enter the details for your funds members. For us that’s simply copying the amounts from GnuCash. The real effort in preparing your own tax is entering the data throughout the year into your accounting system. As you have to keep your records somewhere and as a trustee you should be professional managing your fund, entering your transactions throughout the year should be straightforward.
Section H Assets and Liabilities. I run the GnuCash Balance Sheet report and copy the details. I enter tax liability in Y other liabilities.
Section I Regulatory information. Hopefully you can tick No to all the questions. G and M are trick questions to catch those automatically ticking No. Did the SMSF make and maintain all investments on an arm’s length basis? and are assets appropriately documented as owned by the fund? Hopefully you can answer Yes.
Section J Other information. You’re on your own on that one, it’s not relevant to me.
Section K Declarations. Enter you details etc.
If nothing else, I hope you find the spreadsheet of some use. Completing the tax return is the easy part. Maintaining your records throughout the year and understanding your responsibilities as a trustee of a SMSF is the important and difficult part.
For more information on running your own SMSF head over the the ATO site.
Coming soon I’ll run through the preparation of SMSF accounts. Feel free to ask any questions or provide advice. Though remember this site is for entertainment purposes only and I neither provide advice nor am qualified to do so.
Related posts:
Preparing your own Self Managed Super Fund (SMSF) Tax…
This is an idiots guide (I’m the idiot) to preparing your own SMSF tax return.
BUT wait there’s more, a free SMSF tax and CGT calculation spreadsheet, that’s worth every cent you’ll pay for it!
I’ve prepared by own SMSF accounts and tax return for the…
I just tried using the CGT Event spreadsheet and encountered a few problems:
1) Time held was blank even though I had keyed in dates in both date bought and sold. The formula looks fine but nothing shows up in this cell.
2) Total purchase cost should include commissions, not reduced by commissions
3) Typed in 35 for sale price but it displayed as ####
4) CGT discount for assets held for more than 365 days should be 1/3 for SMSF and not 0.5. SMSFs pay 10% CGT, not 7.5%
I have done a screen capture of the above. I can email it to you if you like.
I also noticed the spreadsheet was only for shares. Do you also trade options in your SMSF?
Hi Christina, thanks a lot for the feedback.
1) Time held was blank even though I had keyed in dates in both date bought and sold. The formula looks fine but nothing shows up in this cell.
doh! I had set the field text to the same colour, it is fixed now.
2) Total purchase cost should include commissions, not reduced by commissions
of course it should, fixed now
3) Typed in 35 for sale price but it displayed as ####
thanks, the width of the column was too narrow, fixed now
4) CGT discount for assets held for more than 365 days should be 1/3 for SMSF and not 0.5. SMSFs pay 10% CGT, not 7.5%
I have fixed this now. The two fields at the bottom of the CGT Events Tab can be changed to work for different tax rates and deductions.
Christina thank you very much for the pointing out these problems. I have fixed them and uploaded the new spreadsheet.
If you or anyone encounters more problems then please let me know. If you don’t wish to wait for me to fix the problems you can do it yourself. I have protected the tabs from changes, but there is no password. So use Tools->Protection->Unprotect Sheet to allow changes. If you do spot and fix your own changes I and other users would appreciate your feedback, so it can be fixed for all.
Hi Dean
You are most welcome. I have yet to try out the other sheets. Will let you know if I find anything that needs fixing. It is a useful resource to have. I have never heard of anyone else doing their own SMSF tax returns before. I always thought you need software like BGL to do it.
BTW, how do you handle your options investments? Do you use the shares spreadsheet as well? I like to sell cash secured puts for shares I don’t mind owning so in these transactions, date sold will be before date purchased. I also read that if put option gets assigned, the premium is be used to reduce cost base for the purchase of the shares so it is not a CGT event until shares are sold. If put option is not assigned, then CGT event happens put option expires or is bought back. This is my first FY with using options in my SMSF investment strategy so it was great to find someone like you who has been doing this for a while.
I am looking forward to your future posts on how you do the accounting for your SMSF transactions.
Hi Christina
I’ve been checking out your site and really like what I’ve read. Fantastic performance last year, if a tad depressing for me! I thought I’d done well, but you really hit the ball out of the park. I’ve subscribed to your feed and look forward to digging deeper.
Package software makes preparing SMSF accounts and tax returns easier, but they’re not required. The hefty renewal fee always put me off, especially when I figured out the compounded figure. IIRC I calculated that after 25 years I’d have over $50k extra in my super fund by not using BGL! I should write about that one day.
Options. At the moment all my options investing is in the US and outside of super. I have another spreadsheet which handles my options, I could tidy up and send it to you or publish it if you’re interested, but that could take a while. It also does all the US currency conversions.
Date sold will be before date purchased. Rather than even think of sold and bought I simply think opened and closed. I may say buy, sell etc but they’re just words to keep it simple. So think open and closed for all positions whether shares or options.
If put, the premium on puts is used to reduce to the cost basis, so no CGT event until you sell the shares.
Keep in mind I’m neither an accountant nor qualified to speak on tax or investing.
from the 4th line down the colour of the font is the same as the fill colour meaning you cant read it.
regards
Thanks for your comments Andrew. The problems are fixed now.
thanks dean.
what do you do about the audit?
who do you get to do that and what do they charge you?
regards
I use an Auditor I found via the Melbourne SMSF group. He charges $385 and does a great job. You can google SMSF auditor and find one that fits your needs. Some charge as low as $250.
As I use Gnucash my SMSF runnings costs are auditor, SMSF levy and small miscellaneous costs.
I forgot to mention you can turn off the protection (Tools->Protection) on the spreadsheet and edit any formatting errors you find.
Well, with only a little while to go until the 28 Feb deadline for my SMSF’s first tax return, I just got shafted by the company I thought was going to do my return. I sent them the docs in August, chased them up a few times, and just now get an email saying that they can’t do it. My transactions are quite straightforward – all US listed stocks in USD, so I’m thinking I might find an auditor and do my financial statements and return myself.
Time to check out Gnucash?..
Hi Mark
Give the ATO a call asap and inform them of what has happened and ask for an extension. Finding an auditor and getting the audit down within three weeks at this time of year is a very tall order indeed.
ATO site has all the monthly currency data you’ll need for your US transactions.
Good luck, let me know how it all goes and feel free to ask any questions.
Thanks for the encouragement Dean! I have looked at the tax return and it doesn’t seem that daunting, and I have found an auditor with quick turnaround. The main things I’m unsure of now are the financial statements to give to the auditor, ie. what details, format, etc. Can you recommend any websites with details or examples?
Love the blog, by the way!
Check out http://bglcorp.com.au/sites/default/files/SFUND/Financial%20Statements.pdf
and there are some more http://bglcorp.com.au/products/simple-fund/sample-reports
You could also take one of the free trials of BGL Simple Fund or MySF, run your accounts through them and use the report output for your reports. Or if you have time, create your own spreadsheet and double check that with that output from one of those SMSF software packages.
Thanks for the nice words about the site.
Here’s an update in case you’re interested – I decided it was too late to master the intricacies of SMSF accounting, so shopped around for a not too expensive ($1,100) and not too slow (< 2 weeks) compliance and audit company. Still thinking about doing my own statements and return in future years. I figure the first year's statement will at least give me a template to work with if I do go it alone in future. Interestingly, my broker is IB, which doesn't provide holding statements (as far as I can tell), so the auditor has asked for a letter from IB or something similar to verify the authenticity of the activity statement I provided. Have others with IB in Aus had this situation?
Thanks for the update Mark. I think you made a good decision.
Hello,
I can understand your point of view, there are accountants who are taking advantage of the SMSF business and charging over $1,000 min. I do my own as well and I have an accountant plus an auditor who charge me only $220 each. I do my own paperwork, I have my own system, which I developed myself. There is a new software company that is developing an internet based platform that will be very affordable. They will provide portfolio, super and accounting functions and alot more. Once they are ready I will release their webiste address.
Wow $220 each. They are fabulous prices. I look forward to finding out about the new online service, though I am happy with my auditor.
internet based platform? great, I wanna try it
Hi Dean, I am a new player with SMSF and Gnucash, and I would like to ask you how you have set it up for the Aust. share market. I can only find options for overseas setups.
Any help please
Alan SA.
Hi Alan
I don’t have time right to explain the complete setup, but if you have any specific questions I’ll try to answer them. In general you need the following account groups; assets (create an account for each asset eg bank account), opening balance account for transferring in, income accounts (e.g. employer contribution, interest), expenses and liabilities. YOu can copy a standard set from Gnu and delete what you don’t want or create that from scratch.
Thanks Dean I see what you are saying.
I use a specialist firm in Brisbane, SMSF audits Pty ltd, they charged a flat fee of $ 275 and I emailed him all the info required. They completed the audit in 3 working Days , there contact is info@smsfaudits.com or 07 3367 2477 , they seem to have clients all around Australia
I would like to know how to allocate profit to members of SMSF.
Senario is:
SMFS was set up in Dec 2009
Two Members
Member A rollovered $100,000 into the SMSF, and received $10,000 employer contribtuion
Member B rollovered $50,000 into the SMSF and received $5000 employer contribution.
At the end of 2010 financial year, there are profit of $1000 for the SMSF to be allocated to members.
Could you please help me with the allocation of the profit. Someone says profit should be allocated according to opening balance. In this case both member’s opening balance is zero, so 50/50. Someone says profit should be allocated according to contributions. I am confused. Need your help.
Is there anything you suggest me to read regarding this.
Thanks,
allocating SMSF profits
Gladys, I am not an accountant or financial advisors, so the following are simply general comments which I can take no responsibility for.
Individual contributions should be allocated to the member, I’m sure you know that.
Profit should then be split according to starting balance and contributions during the year.
Here is the formula I use =(I57+I58/2)/($K57+$K58/2) Does that help? Of course not!
In words: (Members opening balance + half of the members contributions in year) / (fund opening balance + half of the funds contributions in year).
I have not found hard and fast rules on ATO site for this. In your case I would consider the rollover amounts as starting balances.
Hope this helps.
Thanks for your answer. I prefer to use rollover as opening balance as well.
Are Financial Statement of SMSF on cash basis or accruals basis? Do you need to state whether cash or accruals in the “Notes to Financial Statements”.
Hi Gladys, I recommend you pop down to Borders and get a book on managing your own SMSF. You may also consider one of the free trials to SMSF software out there. Run all your 2010 transactions through it and produce your accounts and reports and see what they produce.
I can only tell you what I do. I run on an accruals basis and yes you have to state what method you use in your notes.
Once again I am not an accountant or financial advisor and this is not advice, Please seek qualified assistance.
Hi Dean
Have picked up some good info from your site. Thanks.
I am still doing the hard yards as my SMSF gets registered with ATO.
Have not decided yet on how I will track all the transactions.
Softwares for sale in Market are too expensive and they ask for fees every year.
Will have to come back and read more.
Thanks again.
KB
Thanks a lot KB,
Do take a look at GnuCash, http://www.gnucash.org/ , it’s free and has meet my needs. Though it does take a little bit more mucking around that the specialist SMSF products.
Hi Dean,
I found your Q & A very useful thank you. When the SMSF becomes a pension fund is the tax return exactly the same as when it is on accumulation phase. Since the earnings of the fund are tax free and all payments are tax free after age 60 years old why do we still need to put in a tax return?
HN
Sorry Hing Neo, I can’t help with your question. Pension age is a long way off for me I’ve not yet looked into it. Thanks and good luck finding an answer. If you do, it would be great if you could link it here for the next person looking. TIA – Dean
Hi Ing Two reasons
1. There is a minimum balance that you must take out evidence that you have done this has to be shown.
2. If you are in pension mode you just can ‘t put in extra contributions. your return is needed to show that you have complied with these two rules
Graeme
Hi Graeme,
Thanks for the two good reasons SMSF needs to put in annual tax return. Since I last wrote I was thinking you need to put in annaual tax return to claim your imputation credits from shares.
Do anybody knows where you can do a course in annual taxation for SMSF?
Hi Dean
Thanks for your info. where i can find some sample on minutes of meeting.
tony
My question relates to refund of franking credits. I have both an Accumulation Account and Pension Account. Shares are segregated to the Pension Account and all franking credits relate to those shares. No tax is payable. Does the refund go to the Pension Account and as I am under 60 is the payment to me taxable.
Hi John,
I assumed you must be over 55 years old and on transition to retirment pension (TTR). All earning from your segregated pension fund as you stated no tax is payable, therefore the franking credits from your shares go into the pension account tax free. As you are under 60 your TTR pension or your pension if you are retired is taxable.
G’day Dean,
Your spreadsheet is a fantastic idea, even if I have not tried it as yet! I use Quicken Personal Plus software, and find it adequate and the renewal not too expensive considering I get daily price downloads for my stocks. I got a friend to set up an Excel spreadsheet to do all the currency calculations on USD transactions, sent it to my accountant, and to my amazement I found her with a printed out copy and punching the data into her program by hand! She will charge me over $5,000 for this! So I decided to have a go at filing my own tax.
1) I use Interactive Brokers, but they don’t give a Franking Credit report for Australian dividends on their statement yet (muted for the future), so does anyone know what is the best way to get these details easily?
Shane
Hi Shane
$5000 seems very steep, but I’m sure that includes preparation of annual financials and auditing as well as the tax return. Still that’s very expensive, but I just wanted to point out that the tax return is probably the easiest part.
As to franking credits. You have a record of the cash dividend received in your IB account. You probably either know or can easily find out that percent franking. With that information you can work out the franking credit. =cash_dividend/0.7*0.3 eg if you got a cash dividend of $1820 from Telstra and it was 100% franked then the franking credit would be 1820 / 0.7 * 0.3 = 780. Please note I am not an accountant or qualified to give advice, this is not specific advice, just my opinion which you should check.
Hello Dean,
Thanks a lot for the help. I.B. said that if there is no tax withheld from the Australian dividends, then they will be 100% franked, so yes, I should be able to work out the imputation credits on those that are 100% franked, and I can check out the rest some other way.
Can you tell me if the Tax department allows me to file my SMSF return when my Pty. Ltd. Company is its trustee? Does it matter if it is a simple, personal SMSF or if it is held within a company structure? This is the only function of the company at the moment.
Thanks again,
Shane
Hi Shane
I am not aware of any reason why you can’t file your tax return when the company is the trustee, but give the ATO a call, they are always very helpful and easy to talk to.
Please note, I’m not an accountant or financial advisor and am not permitted to give personal advice. This comment is general in nature and should not be taken as advice.
I’ll be doing our own SMSF return from now on – I spend so much time hand feeding our accountant all the information, answering silly questions AND getting charged for it! One accountant tried to charge me over $4000 to prepare the returns because we deal in share/options trading and he had to learn how to account for this!! I virtually had to tell him how to do it. Crazy …..
The website is my latest of many – not to be taken seriously.
I just saw your last response 20/10/2011 and it struck a chord!
I have had a SMSF for 15 years and turned it into a SMS pension fund a couple of years ago when I retired. The fund was used for share trading.
during this time and I didn’t mind the accountants fees then. However since the GFC I have just stayed with one stock and done nothing more than take out the minimum pension. Last year I got an accountants and auditors combined bill of $3000+ – That for accounting and auditing a
static SMPF.
I have just been asked to submit my info to the accountant and decided to find a cheaper route.
I saw on the internet some time ago a consultant saying that you are not obliged to submit and audit under certain circumstances. Do you know if it is true? The ATO says it is compulsory – but the ATO agent just reads the base rules.
I welcome your comment and advice
Thanks
Hi Rodney, sorry I’m not licensed to provide personal advice. Dean
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