The director of an advisory firm has warned practitioners to be mindful of certain methodologies often applied by superannuation software applications as they may lead to compliance issues for an SMSF with respect to its investment strategy.
Speaking at The Tax Summit hosted by The Tax Institute in Sydney last week, Cooper Partners director and head of SMSF and succession Jemma Sanderson noted: “We love our modern super fund software, it’s very easy to use, you can [take advantage] of data feeds [included] on it [and] all those sorts of things, but if the [fund’s] assets aren’t treated correctly within the system in terms of a particular class of asset, that can then [mean the SMSF] ends up with a situation where a particular asset is classified incorrectly within those asset classes.”
Sanderson pointed out this can lead to problems with the annual SMSF audit as the asset allocations of the fund as reflected by the information generated drawn from the superannuation software may not match the allocations detailed in the fund’s investment strategy.
Further, with regard to SMSF asset allocations, she acknowledged the matter of specified portfolio holdings of particular asset classes within an investment strategy continues to trigger compliance concerns.
“We’ve got financial advisers who say: ‘We’ve put in place this investment policy for our clients and it doesn’t have ranges, it doesn’t say [the fund will hold] Australian shares [that will make up] 30 per cent to 50 per cent [of the SMSF’s investment portfolio]. It just says we will invest in certain asset classes and might list those classes, but doesn’t attribute any ranges to them,’” she noted.
“[As a result], the auditor has [concerns] because they’re thinking: ‘How can I possibly audit that investment strategy when I can’t assess whether the investments of the fund are in line with that investment strategy without further investigation?’
“So there is a lot of push back that can come from those particular circumstances.”
