Accounting

It is an ATO requirement that an SMSF must prepare a set of Financial Statements and lodge an Income Tax Return with the Australian Taxation Office each year. If we are the accountant for your SMSF, we will lodge the annual return for your SMSF. We therefore rely on you to provide us with complete year end documents to perform the accounting process.

Allocation of Income

We use the daily weighted average balance method to allocate the SMSF income generated during the year to the Members in the Fund.

Daily Weighted Average Balance Method
Members will have different balances in the SMSF. Using this method ensures the Member with the higher balance receives a bigger slice of the earning of the Fund. This method adds the total amount allocated to the Member accounts for the year by placing a weighting on each dollar based on the transaction date (how many days the transaction was relevant to the financial year/period).

Legislation or Rulings

It is worth noting that there is no legislative requirement on a particular allocation method an SMSF must use to allocate income to its Members. As per the SIS act, the only requirement in allocating income to Members of the SMSF is to use a fair and reasonable approach. This leaves some discretions to the Trustees of an SMSF on how income should be allocated to its Members. For more information on the legislative framework, see the reference in the regulations on how income should be allocated to Members:

Example

When Superannuation Warehouse performs the accounting process for your Fund, we use the daily weighted average balance method to allocate the income to the Fund’s Members. For example, if your Member balance consists of 40% of the Fund and the net income for the year is $60,000,  your share of the net income is $24,000 (40% x $60,000).

Special considerations where a pension is in existence

If your Fund is partially in pension and partially in accumulation phase, the SMSF might need an Actuarial Certificate to determine the tax exempted income allocation. Please see our Actuarial Certificate website page for more information:

With Superannuation Warehouse as the accountant and the administrator of your SMSF, the accounting, tax and audit services for your SMSF are all taken care of. For more information on our services, please visit our administration page here.

  • Shane M

    If I role in $100k and my wife roles in $50k, these amounts legally stay seperate?

    We can combine the money to buy say a house for $150k?

    If I contributed 66% for the assets and wife contributed 34%, the profits we make off our one investment in the house would be distributed like this?

    Do you work out the member balances annually or is this something I do?

    Do you come with software to assist running the smsf?

    • https://www.smsfwarehouse.com.au Superannuation Warehouse

      Shane,

      The principles used in an SMSF is exactly the same as an industry Super Fund.

      Where a big fund might have thousands of Members, your Fund in the example given has 2 Members only. The SMSF will own certain assets. The earnings on this pool of assets are then allocated to the Members on a daily weighted average basis. This means the Member with the bigger slice of the pie gets a higher portion of the investment earnings.

      The accounting software we use (called BGL) does this allocation of earnings to Members. If we are the accountant for your Fund, we will prepare a set of Financial Statements that include Member Statements for the Members in the Fund. We prepare this and will ask you as Trustee to review and sign this before we send it to the ATO.

      Thanks for posting and keep well,

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We are Melbourne based with clients throughout Australia. Our SMSF administration service is mostly paperless. This enable us to charge a fair fee, resulting in a good value-proposition for you.

No Advice

Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.