Accounting a shambles

Background

Patrick, an adviser, approached Super Plus to review a SMSF client which contained transition to retirement income streams (TRIS pensions) the adviser was not confident that the previous administrator had correctly dealt with the pensions in the fund. He was also concerned that fund transactions such as pension payments and related unit trust transactions had not been monitored.

Super Plus Review

We reviewed the 2008 financial statements and member statements and found that two members had commenced a TRIS pension, however, no pension documents had been prepared by the previous administrator to confirm the details of the pensions.

Also, we noted on the member statements that the members’ accounts had been converted from fully preserved to unrestricted non-preserved on commencement of the respective TRIS pensions even though the members had not met a condition of release, which would enable this to happen.

We noted withdrawals (purchase of depreciable items) from the fund’s bank account relating to the related unit trust property, but the corresponding transactions, and depreciation, had not been taken up in the 2008 unit trust financial statements and tax return.

On further review of the unit trust investment, we noted that the unit value did not reflect the value of the net tangible assets of the trust, including a commercial property (leased to a related party).

We also noted that the value of a separate residential property held by the fund was recorded at cost.

Super Plus Actions

  1. The member statements were amended to reflect the correct preservation status of the TRIS pension accounts.
  2. Pension commencement documents and minutes were prepared by Super Plus, and signed by the trustees to confirm the pension terms and tax components.
  3. We requested that independent valuations of the unit trust’s commercial property, and the fund’s residential property be obtained. This information assisted us in calculating the correct minimum (and maximum) pension amounts.
  4. We requested that the 2009 unit trust financial statements and tax return be amended by the trustees’ personal accountant and unit trust reimburse the super fund for expenses paid from the wrong bank account.

Results

The trustees and the adviser, are now confident that the fund’s administrative tasks are being taken care of as required.

The fund’s transactions are now processed on a regular basis, with any concerns being raised with the trustees and dealt with on a timely basis.

Draft unit trust accounts are provided to Super Plus for review and reconciliation to the super fund accounts before finalisation. This means that no unnecessary additional costs are borne by the client due to amendments.

The trustees provide Super Plus with updated valuations of property every three years (less, if the expected valuation of the property has changed by a material amount). This means that pensions paid by the fund are based on correct pension account balances.

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