Your SMSF might own shares, cryptocurrency, gold or silver bullion. But if the auditor asks you to prove those investments belong to your fund, could you?
The ATO has recently highlighted concerns about how SMSF auditors verify investments, particularly listed shares and cryptocurrency. The issue isn’t necessarily whether an investment was purchased, but whether there’s enough reliable evidence to confirm it exists and belongs to the SMSF.
And it’s an important reminder for anyone managing their own super. Buying an investment is only half the job. You also need to keep records that show what your SMSF owns, when it was purchased, what it cost and what it’s worth at the end of the financial year.
Why does this matter?
Every SMSF must have its financial statements audited each year. The auditor needs sufficient evidence that the fund’s assets exist, belong to the SMSF and have been appropriately valued.
If that evidence isn’t available, something as simple as confirming an investment can become a time-consuming exercise. It may delay your annual accounts and audit, lead to additional costs or raise compliance concerns. And remember, a bank payment showing that you bought something doesn’t necessarily prove your SMSF still owns it today.
What records should your SMSF keep?
The good news is that most recordkeeping problems can be avoided by keeping the right documents as you go. Here’s a practical checklist for common SMSF investments.
Shares and ETFs: Keep purchase and sale confirmations, CHESS holding statements (where applicable), broker or platform statements, dividend records and evidence of your holdings at 30 June.
Cryptocurrency: Keep complete transaction histories, exchange statements, wallet addresses, transfer records and evidence that the cryptocurrency belongs to your SMSF. Make sure your SMSF’s cryptocurrency is kept separate from personal holdings and that you can provide additional evidence of ownership or control if your auditor requests it.
Gold and silver bullion: Keep purchase invoices, storage details, identifying information such as bar numbers, weights and purity, and evidence supporting the value at 30 June. Clear, dated photographs are also useful, particularly for privately stored bullion.
Property: Keep purchase contracts, settlement statements, title and ownership records, lease agreements, rental statements, expense invoices and supporting evidence of the property’s market value at 30 June. An independent valuation isn’t necessarily required every year, but the valuation must be supported by appropriate, objective evidence.
Cash and term deposits: Keep bank statements, term deposit confirmations, interest records and evidence of balances at 30 June.
And don’t forget these three things:
Make sure ownership is clear. Your SMSF’s investments must be kept separate from personal and business assets. Where an investment is held through a custodian, bare trust or another permitted arrangement, keep documents that clearly establish the SMSF’s beneficial ownership.
Keep records of every purchase, sale and transfer. Don’t rely on bank transactions alone. Save the documents showing what was bought, sold or transferred, when it happened and the amounts involved.
Check your records at 30 June. Make sure you can identify what your SMSF owned at year-end, how much it held and what those investments were worth. The evidence required will depend on the type of investment.
This is a general checklist, and your auditor may need additional evidence depending on your investments and circumstances.
The good news is that a little organisation now can save a lot of headaches later.
You don’t need to become an accounting expert. But keeping your records up to date throughout the year, rather than trying to find everything at audit time, can make your annual SMSF accounting and audit much easier.
They make the rules. We help make them simple to follow.
At Freedom Financial Solutions, we help SMSF owners manage their accounting, tax, compliance and annual administration requirements.
Learn more about SMSFs at Freedom Financial Solutions
General information only. This article does not constitute financial or legal advice.
