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Power of the cloud emerging

The cloud is now beginning to make a noticeable impact on the operation of SMSFs. Amreeta Abbott outlines how this is happening.

Find the cloud confusing?

What if I tell you a company can be registered, the minutes signed, the company added to your corporate management system and can get an Australian business number (ABN) within 15 minutes and with a minimal chance of making a mistake?

You don’t even need to be able to type 500 characters a minute. All of this is possible, right here and right now within the mighty cloud.

If you are outside of the technology sector, you are right to be confused about the cloud.

The same way that our clients and many others don’t understand superannuation and why it keeps changing all the time, for a vast majority of the population getting a handle on the cloud is difficult.

But then every commentator tells us that in financial services and even the SMSF industry it is vital to understand it and to be in the cloud or face a dire future.

At the outset don’t panic as things are not that dramatic. Sure technology, and in particular mobile technology, is moving at a lightning fast rate, but there will always be a generation that will stay rooted in the past.

So any jump into new technology has to be measured from your customers’ perspective.

Digital signatures are great for the younger generation, who move around a lot and have access to email or a mobile device, but try getting a client over the age of 70 to sign their tax return with a digital signature.

On the flip side, once you have tried it and your signature is now stored as data in the cloud, the next time you come to sign something you won’t want to have to do it on paper and return it via snail mail.

And that is the beauty about the cloud: you don’t need to understand the technology behind digital signatures to see it working, just what it is, how it works and what the benefits are to your business and your clients.

For those looking at a more detailed definition, cloud computing relies on the sharing and integration of resources to achieve coherence and economies of scale similar to a utility over a network.

The goal of cloud computing is to allow users to receive the benefits from a wide range of technologies and applications without the need for deep knowledge about or expertise with each one of them. The cloud aims to cut costs and helps users focus on their core business instead of being impeded by IT obstacles.

You and the cloud

Let’s face it, if you are alive, you are in the cloud somewhere. If you are using internet banking, stock trading, buying or selling a car or house, going to a play, sports event or the theatre, buying tickets online or even by phone, you are in the cloud.

The data has been recorded, checked and stored for use somewhere to be accessed by a mobile device or matched against other databases by a government agency.

So the talk about data security and the cloud should be pointed at the banks and not when using a cloud-based SMSF accounting service provider.

Even in most offices there are a number of cloud systems being used, such as a corporate management system linked to the Australian Securities and Investments Commission (ASIC), acquiring documents from an online provider, lodging income tax returns and creating an ABN or tax file number (TFN) with the Australian Business Register portal.

Importantly, each of these systems incorporates the concept of a client that includes various fields of data, such as name, address, phone number and email address

Does it reflect a true picture of real life? Not really. You have one client in the physical world, but dozens of records in various databases in Australia and in some cases worldwide.

And most likely if you have structured your client correctly, they have numerous companies, whether acting as a business entity, an SMSF trustee or an individual.

So what happens when the client changes offices as well as registered and principal addresses for their business? In a practical sense, changing someone’s address means changing records in your accounting package, sending a few 484 forms to ASIC, and lodging forms with the Australian Business Register and the ATO.

Unfortunately, this is where the cloud lets us down because none of these systems communicates with each other, which means having to re-enter the same fields of data correctly time and time again, with the probability of making a mistake increasing exponentially.

Lack of communication

The next wave of cloud technology will include the ability for applications and systems to talk to each other, or all-purpose sharing.

Gone are the days where applications that cost you many thousands of dollars a year remain selfish and ignorant pieces of code holding their data and never sharing it.

Luckily the industry is heading in the right direction and every service, even the simplest one, has some form of application programming interface (API) that provides developers of other applications with the tools to access data or push data into their system – true synchronisation.

Five or 10 years ago an API was a bonus feature. Now it’s a must-have, but is still not used fully.

But before we move onto synchronisation, bringing the application world together to deliver a process or system, or in the SMSF world an automated strategy, integration is not where it is at anymore.

Recently I met a colleague who is very well regarded, but not strong on technology. Anyway, in this particular meeting he announced he had been collaborating with a well-known SMSF accounting platform and was ecstatic his product was soon to be integrated with an SMSF provider and put on their shopping cart.

That is not data management or synchronisation, it’s eBay.

The new synchronised SMSF world

The pain in completing a limited recourse borrowing arrangement (LRBA) for most practitioners is palpable. It is not an easy process and can take weeks to complete if there is not a mistake in data entry along the way – usually the case when completing the ABN/TFN form.

This can result in up to a month’s delay in getting the TFN back and establishing a bank or cash management account. Moreover, how often do you have clients buying at auction and documentation needs to be completed yesterday?

The SMSF LRBA process – automated and synchronised

Some organisations have begun addressing this issue to make the implementation of an LRBA more streamlined through the use of technology.

For example, the NowInfinity Strategy System, among a range of other strategies, has automated the creation of an LRBA that can be started directly from within the system if the client’s details and data are there, or equally from other cloud client programs such as Xero, Class Super and many others.

The steps followed are in order and the administrator or strategy creator cannot move to the next step until the earlier step is successfully completed.

This is important for compliance and also the auditor as a key feature of the system is to house all documents and steps to completing an LRBA in their personal vault, a cloud-based storage system or even back onto the admin platform, enabling real-time auditing.


The case below details the steps involved in setting up an LRBA with an existing SMSF when the fund is set up on a cloud-based admin platform.

Find the fund in your SMSF software or practice manager.

2. Upgrade the trust deed, pulling the information directly from the existing database, which will be the source of truth. An upgrade will generally be required if using a bank or building society to fund the loan.

3. Complete the upgrade and then send it to the client for their digital signature.

4. Receive the digitally signed document back from the client and place it into the client’s vault, created, for example, with Google Drive, plus push the document back to your practice manager for live review by the auditor.

5.Create an investment strategy for the acquisition of the property using an LRBA. The investment strategy will be pre-completed, although with input of the LRBA property investment, the amount of the liabilities and any insurance strategy for the fund.

6.Create a corporate trustee for the holding trust with data that has been pre-populated from the previous order with the direct feed from the corporate supervisor into ASIC.

7. Form 362 appointing a tax agent is automatically created from business data and can be sent to the client for digital signature. Once received it can be auto-processed with ASIC.

8. Create the holding trust – all data is already known and the strategy system will complete this step automatically and make it ready for digital signature. Once signed it can be placed in the client’s vault.

9. Obtain an ABN/TFN for the trustee of the holding trust using the automated system that has taken all the data input for the establishments and uses a robot to complete the

Australian Business Register. Integrity of the data that is pre-populated into the Australian Business Register forms is higher than data entered manually.

All in all, with the automation and synchronisation of the system, the strategy should take no more than 25 minutes for even a junior administrator to complete, provided the original source data is complete.

Automation and direct SMSFs

Not everyone is going to use an SMSF specialist or accountant. But it is possible to automate and build a strategy for a member of the public where they create their own fund and do the investment without the need of a specialist. Let’s look at how this could happen.

A 40-year-old marketing consultant who is using Xero for his accounts logs into a specialist super site and sets up an SMSF with his existing personal and company information.

He creates a fund and special purpose corporate trustee automatically with the data, registering for an ABN/TFN within three minutes, receiving the documents back for digital signature immediately, and then the documents are stored in Xero and passed to an administration provider where the fund has been automatically created.

At the same time, this data is pushed into his choice of cash account and his existing superannuation money is transferred from his existing industry super fund into the cash account.

The consultant and his spouse would like to invest in Australian shares and an investment strategy is created for that with the existing client data, and then the investment strategy data is pushed into a model portfolio provided by a research house and executed through a trading platform.

Given they have young children as part of the strategy process, members of the fund will be offered life and total and permanent disablement insurance, with acceptance based on the reply to a few onscreen questions.

Technology will drive automated strategies and deliverables for the adviser, administrator and the true do-it-yourself super member. Systems are already being connected and synchronised, demonstrating the real potential of the cloud, and this is just the beginning.

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