High SMSF accountant's fee

My accountant has just prepared my tax return for my SMSF and mailed me a bill along with the tax papers to sign for a bit less than $3000. This seems an outrageous amount for an SMSF that has only switched funds of around $200k from one bank account to another and made a couple of dozen share trades.
What are my obligations here please? Obviously he's due some amount for the work he's done, but there's no way it's worth that much! Frankly I just want to get shot of this guy and switch to somebody who charges a reasonable rate without trying to gouge me. Btw I only made a profit of a few thou from the trading.

 

Hi SJ,

If you have read any of my other (300+) posts / responses on Invested, you should be aware that I generally try to have all the facts before I respond to things, but in this case I just need to say:

Mate - you have been ripped off .​

Now, I am not saying that your accountant didn't do work worth $3,000 based on the hourly rates they charge, but some of the following could have happened:

• A more senior (i.e. expensive) staff member was doing the work rather than a more junior person that was capable (good SMSF accountants are hard to come by!)
• They stuffed it up somewhere and had to 're-work' some of the work
• They processed all trades / transactions manually (hello - it is 2013)
• Maybe they didn't have all the information / documentation they needed and had to spend time chasing it from you
• Maybe that $3000 fee included the 'independent' audit or other additional work that was needed

The above is based on my insight of running a business that looks after many hundreds of SMSF returns each year.

Can I also point that the amount of profit you made is totally irrelevant when it comes to your lodgement and compliance obligations - just because you have a less than stellar year on your trading, doesn't mean you should pay less in fees.

Now, I recommend you do the following:

• Ensure they lodge the return if they haven't already
• Get the signed audit report
• Get your records for this year back from them
• Don't pay the fee straight away
• Did they provide you with an engagement letter / service agreement - generally they have to do this before doing the work - this document should either outline the fee or how the fee is calculated - the document is for your piece of mind as well as part of their obligations
• Request a detailed breakdown of the time taken to complete your accounts + return
• Contact me for an independent review of the work done, time taken and an appropriate fee

I normally don't like getting involved when it comes to fees paid to a former accountant and their client - typically it is not worth the effort if you are saying adios - but in this case it will likely help your case and you can come to a fair resolution with them.

You acknowledge that you need to pay them something, and if you don't get a satisfactory resolution, you are within your rights to complain to their professional association as a last result (CPA / ICAA / IPA). Please be aware that it is their organisation - meaning they are on the side of the accountant - not you!

If you have a SMSF with only cash and shares, the applicable fee should be very reasonable - in my opinion about half of what you paid. The way that my business - Superfund Partners works is that we avoid manual processing of all transactions wherever possible - so your fee is fixed and doesn't change regardless of how many trades or transactions you have - great if you are an active trader - doesn't matter if you undertake 10 or 110 share trades. Our fees also include most general (non investment) advice you need all year - so you know you can pick up the phone without being charged.

No doubt other contributors to Invested will pitch in their opinions on what you should do, and dare I say there will people who will put forward fees or solutions that cost less than what I would probably charge, but I know that our service really hits the mark with our clients (including a couple of Invested members) - so please feel free to get in contact and have a chat - and you can make a time to see me in person if that suits (no charge no obligation of course )

Hope you get a resolution - you have been dropped in a bad position through no fault of your own.

SM (aka Kris)

 

Thanks for that Superman! Actually I'm not sure if he'll lodge my return unless I pay his fee - do you know when Super returns are due to be lodged? Also his fee includes the auditor's fee (SMSF Audits), though I gather they're pretty cheap. I never received any documents regarding what his fee would be - it seems to be as much as he thinks he can squeeze out of me though! This guy is also on the Gold Coast (I lived there but have moved back to Melbourne.)

 

Yes, it sounds like you've been ripped off - or he has having a go.

You would probably expect to pay less than half that.

 

You have until the 15th of May assuming previous years are lodged on time.

Can you confirm what professional association (CPA / CA / IPA) he / they are part of? I should be able to figure out how you can use that to get a good result. If they haven't provided an engagement letter, their professional association will not be happy.

We look after clients in most parts of Australia.

Please let me know.

Kris

 

Yes thanks, he's a CPA according to their website.

 

Hi sharejunky,

That fee does sound very high for a fund that only has a bank account and some shares. Are you still in accumulation mode, or pension phase?

As Superman has suggested, I would be requesting a detailed invoice. Is this the first year you have used this accountant and/or had a SMSF? If not, what was the fee last year? You would expect maybe a 5-10% increase in fees, but no more than that if everything else was the same.

With regard to auditors fees, mine have varied between $450-600 depending on what was involved each year. Assuming this is what your accountant paid, this means his accounting fees must be around $2400, which I think would be excessive, if as you have indicated it is a pretty straight forward return.

My accountant has never charged me more than about $1200, so much less than you paid! He also gives me a quote upfront, and I can pay it in monthly instalments (that is hs standard practice - eliminates this sort of problem all together!). He has always said that te only person who wins when you pay by the hour is an inefficient accountant! Maybe that is the case here.

As you have suggested most accountants won't lodge your return unless you pay, so you are in a tough position.

Further, as Superman has suggested make sure you have a copy of the signed auditors report - if you choose to go elsewhere next year you will need this to show the new auditor so they can see it complied in the prior year.

I would suggest for future years, you get a fixed price beforehand either from this accountant, or from whomever you chose to use. Let me know if you want my accountants details for future reference

 

Hi Kelly - yes it was about a 40% increase over the previous year's fee, and I'm in accumulation phase (50 yrs old.) You're accountant sounds pretty good - what are his details please? And certainly I'll be sure to ask for quotes in future

 

Wow 40% increase in huge if there is not much difference! Will PM you his details

 

Hi sharejunky,

We use Superplus, off to have a look at Superman's site also though, great to see detailed replies on the forum

 

hey guys,

Seems to be a tad of discussion around SMSF here and it is something i have looked at quite abit lately but i get more confused as i read. I have a super fund that is coming up to my first 100K i had someone who advised me to establish a semi self managed super fund with australian super. but i am still not 100% happy with some of the platform restrictions & some of the expenses. my question is through your experience is a fund under 100K to low of a balance to justify a SMSF at this stage? Information i read contradicts each other.

Regards

Jeffery

 

Hi jeffery85

Whenever people ask this sort of thing, my answer is that "it depends".

You can set up an SMSF with individual trustees for as little as $265 including GST (more if you use a corporate trustee) - this is without any strings attached.

Then the annual expense is an ATO supervisory levy of $200 and the cost of doing the financial statements and the audit. Now if you are handy with Excel spreadsheets and are willing to take responsibility for getting the figures right (with the help of a comprehensive help file) you can do your own financial statements and ATO tax return for a cost of $55 to purchase the spreadsheets. Then the annual audit might be in the region of $330 for a simple fund.

For a fund of $100,000 this is just over one half of a percent per annum after the SMSF is set up.

Of course if you need more hand holding and don't fancy doing your own financial statements then it is going to be more costly but even then, for some people the desire to be in charge of your own finances would outweigh these costs.

 

Hi Jeffrey, most people would use an accountant for their super fund. In this case you would be looking at around $500 to establish, a $200 annual fee, $500-$1000 for accounting fees, $400 audit fees. So on average around $2000 in the first year and $1500 ongoing. But as jorgon has suggested, these costs are often worth it for those want full control, however the general minimum that is often suggested is $200k

 

People complain about costs when they have a SMSF but at 1.5% of your balance it is cheaper than any industry or retail fund you could get and no one ever complains. Still it seems a lot, but it is more than just preparing a tax return.

Financial statements that will pass an auditor have to be of high standard and you don't say how good your record keeping is.

Not saying it isn't on the expensive side but every case is individual and you can't make a judgement without the facts that you left out.

Something you should know is that the accountant has to supply you with a detailed itemisation of how his fee was calculated if you ask for it. I would ask.

 

Ok I eventually got a reply from my accountant when I asked for a fee schedule:

" Normally our cost would be between $1600 to $2200.

In your case there was quite a lot of share trading (ie. Some 20 trades).
This requires a fair amount of work to cover off on these.

Our actual time spent on the job was 14 hours for a cost of $2310. "


I fail to see how am SMSF which only did twenty share trades and changed bank accounts can take fourteen hours to process! Maybe someone here can shed some light?

 

Hey SJ,

I am currently writing an article on why accountants need to lift their game when it comes to SMSFs - and this is a perfect example of why.

Now, I don't want to blast my fellow accountants - no doubt the work has been done to a professional standard, and at the end of the day the issue is not about the cost.

It is about value: You don't see the value in the work undertaken.


Fair enough - I see little value in having compliance work done - it is something that needs to be done by law and by a professional in my opinion (hopefully the die hard spreadsheeters don't come after me!).

In terms of shedding light on why it took 14 hours, that is relatively easy:

Step 1: You provide information / documentation to your accountant
Step 2: The accountant (or his/her staff member) starts punching in the transactions
STOP / WRONG / DO NOT PASS GO - DO NOT COLLECT $200

(subtle I know....)

Therein lies your answer.

Does it seem weird that you effectively run your SMSF online - i.e. online banking, online trading etc, but your accountant still wants copies of all bank statements and pays a staff member to manually enter all the transactional data into their specialist software?

They also probably still put together paper files as their 'working papers' for quality control and for the audit as well. Paper - in 2013?

Why? Who knows - probably because they have always done it that way. It is amazing how many accountants still run their business the same way as they did a decade ago.

There is always going to be a minimum amount of work required when preparing SMSF accounts as they have to be independently audited, and the devil is definitely in the detail - however the amount of manual processing should be minimal.

With technology as it is, there should be no difference in fee between a SMSF with 20 share trades or 2,000 share trades per year provided the accountants systems are up to scratch.

Anyway - enough of me on my soapbox. Anyone reading this probably doesn't care about the internal workings of an accountant practice - and nor should you - SMSF trustees have more important things to worry about (like building wealth....)

I reckon you need to pay the fee and move on.

If you need anything or have any questions please let me know.

Kris

 

Hi Kris

Thanks for your reply again.

However if they are typing in all the details of my transactions then their methods/software must be out of date and backward. Why should the client have to pay for that? And does the ATO even need to know all the
details of every share trade? According to my broker all the info gets sent
to them anyway.

However more importantly it has just come to light that my agent is
charging me TWICE for the auditor's fee! The total fee including audit
was $2860. As I said, the accountant told me their fee (incl. GST) was
$2310. Obviously then they are saying the auditor's fee was $550 (which
sounds fair.) However I contacted the auditor and asked them their fee.
They were initially reluctant to give it, however after I said that the accountant provided details implying their fee was $550 he immediately insisted his fee was only $275. His words "If he told you it was $550 he's bullsh**ting you."

So my question now is, what do I do with this info? Since it's the third time I've had my SMSF done with this guy, is it reasonable to assume they've doubled the auditor's fee the last two times as well?

 

The details of all share purchases and sales need to be recorded as each transaction creates a capital gains tax report which must be declared and are taxable. As far as I know the financial statements must be adjusted at the end of each year to show the market value at 30 June, so they need to know how many shares of each company you have purchased throughout the year so they can work out the value of your fund. So they do need to enter this information. Our auditor always asks us to supply our market value report from commsec at 30 June to show our market values, so it must be necessary to have these valuations done.

With regard to past fees I am not sure there is a lot you can do. I would pay the accountant $2310 + $275 for this current year. I think Kris's suggestion to move on is a good one!

 

Thanks Kelly, I guess providing all details of trades is non-optional then.

Regarding the auditor's fee though I contacted my agent via email to confirm if the amount was $550 and they have emailed back to confirm that. Since the auditor insists his fee was only $275 isn't this a rather serious infraction?

 

After recently sending me a Final Notice, I emailed the accountant asking him to explain why the auditor insists that his fee was only half what the accountant tells me it was. Rather than offer any explanation, my accountant has now emailed me back saying he will reduce the bill by $550! So should I be happy with this, or push for more off having caught them out in an obvious lie? (No doubt they're doing the same to all their clients, or am I being too suspicious?)