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
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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.
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