How I manage my SMSF with Sharesight
Disclaimer: The below article is for informational purposes only and does not constitute a product recommendation, or taxation or financial advice and should not be relied upon as such. Please check with your adviser or accountant to obtain the correct advice for your situation.
Our support team gets many enquiries about how to best set up a super fund in Sharesight, so I thought I would share my own setup. Besides being a shareholder and Executive Director of Sharesight, I, like many of you, have a self-managed super fund. It’s a pretty typical SMSF, with a corporate trustee and 2 members – myself and my wife. I manage the whole thing in Sharesight and Xero. I do the bulk of it myself and then get audit and tax help from my accountant at year end. It’s a very streamlined process. It costs very little to administer and takes very little admin time. The bulk of my time is spent on deciding how to best invest the fund, as it should be.
The Sharesight side
We are both still working full time and saving as much as possible into the fund. The bulk of the investments are in direct equities, a sizeable allocation to ETFs, both Australian and international, and a handful of managed funds. All the assets are tracked in Sharesight and that is my primary management tool for the portfolio. All buy and sell transactions are recorded in Sharesight using the broker import feature. Managed fund transactions (of which there are very few) are entered manually at this stage and I attach a pdf of the confirmation to the trade. Distribution and dividends are all handled through Sharesight. We maintain one portfolio in Sharesight for the SMSF. The allocation to the member accounts is done in Xero at year end. From an investment point of view it is treated as one portfolio with one investment strategy.
I use Xero to reconcile all the transactions against the SMSF bank account. It’s very easy in Xero and ensures that the data is correct in Sharesight and that nothing has been missed. Contributions from our employers and any non-concessional contributions are recorded from the bank statement in Xero as they are received. Xero is also used to produce the annual accounts that are required. Because everything is reconciled along the way there is very little to do at year end before I hand over things to my accountant to review and complete. My accountant has access to the Xero ledger and makes all adjustments and year end entries into Xero. The main entries required at year usually relate to revaluing the portfolio to the year market value This is determined from the Sharesight portfolio value at 30 June. Our accountant allocates all profit or loss to each member account based our individual contributions and a pro- rata allocation of the fund’s investment profit.
I manage the whole thing in Sharesight and Xero. I do the bulk of it myself and then get audit and tax help from my accountant at year end. It’s a very streamlined process. It costs very little to administer and takes very little admin time. The bulk of my time is spent on deciding how to best invest the fund, as it should be.”
Chart of accounts
The chart of accounts I use in Xero contains all the detail needed for produce the annual accounts. It also contains the member accounts. One of the benefits to using Sharesight and Xero is that the chart in Xero can be relatively simple. It’s not necessary to maintain a lot of detail for individual securities because all of that is kept in Sharesight. Our support team can provide a sample Chart of Accounts if you are interested.
I maintain a Dropbox folder that my accountant has access to that has copies of anything the auditor might need to review, including bank statements, dividend confirmations, etc. I try and attach all dividend notices to the Sharesight-generated dividends as a record but there is also a copy in Dropbox.
My accountant prepares the tax return from the information in Xero and Sharesight. At this stage she is using a third party tax software so there is some rekeying of the summary data into the tax return software but this is not a big exercise. Going forward she may be able to use the Xero tax return engine which will reduce or eliminate this step altogether.
Trustees are required to document the investment strategy of the SMSF each year. Typically, this is a pretty bland and generic document that is prepared by the accountant and simply highlights the asset allocation (e.g. the split between equities, fixed interest, international shares). With Sharesight you can make this a more useful and dynamic tool to monitor your investments. The basic report for compliance is prepared as a word doc and updated with the allocations from Sharesight. The reality, however is that Sharesight is really your investment strategy tool. The new custom groups feature will make this even more useful as it is now possible to create reports in Sharesight that will exactly map your desired asset allocation and investment strategy. I hope this is a useful summary of how you can use Sharesight to run your super fund. It should go without saying that you should consult with your accountant when you do use Sharesight for your SMSF. The compliance obligations are stricter than most other investment entities and you want to make sure you get yours set up properly.