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SMSFs: Getting SuperStream right

Although the new SuperStream standard for superannuation payments can provide SMSF trustees with a number of benefits, around five per cent of SMSFs fail to comply with the SuperStream requirements.

Under the new SuperStream system, a non-related employer must send superannuation contributions to an SMSF electronically, using an electronic service address (ESA). For this to happen, an SMSF must first be registered with a messaging provider to obtain an ESA.

One an SMSF has been registered, the messaging provider will link the SMSF to an ESA. The employer cannot send SuperStream contributions electronically to the SMSF until this is done.

It is important that SMSF trustees check with the service provider that their ESA is active and is linked to their SMSF. If the ESA is inactive, the super contributions submitted by the employer will be rejected. SMSF trustees must also ensure that their employer has their Australian Business Number and bank account details. Employers who do not have this mandatory information may accidentally direct the employee’s super contributions to a default super fund, instead of to the employee’s SMSF.

The new SuperStream system helps ensure that employer contributions are paid in a consistent, timely and efficient manner to member accounts. It also provides a reliable flow of payments and information on contributions and achieves fewer data and payment errors due to the better integration of employers’ payroll systems.

Posted on 2 October '15 by , under Super.

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Self-managed super funds (SMSF) aren’t just about financial investment

Individuals may be looking to opt for an SMSF because these provide entire control over where the money is invested. While this sounds enticing, the downside is that they involve a lot more time and effort as all investment is managed by the members/trustees.

Firstly, SMSFs require a lot of on-going investment of time:

  • Aside from the initial set-up, members need to continually research potential investments.
  • It is important to create and follow an investment strategy that will help manage the SMSF – but this will need to be updated regularly depending on the performance of the SMSF.
  • The accounting, record keeping and arranging of audits throughout the year and every year also need to be conducted up to par.

Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that compared to other superannuation methods, is a lot more time occupying.

Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review has shown that on average, the operating cost of an SMSF is $6,152. This data is inclusive of deductible and non-deductible expenses such as auditor fee, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.

Thirdly, investing in SMSF requires financial and legal knowledge and skill. Trustees should understand the investment market so that they can build and manage a diversified portfolio. Further, when creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super and other relevant regulations requires a basic level of understanding at the very least. Finally, insurance for fund members also needs to be organised which can be difficult without additional knowledge.
Although SMSFs have the advantage of autonomy when it comes to investing, this comes at a price. Members/trustees need to invest time and money into managing the fund and on top of this, are required to have some financial and legal knowledge to successfully manage the fund.

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