The ATO has recently undertaken several programs focusing on SMSF auditors and the adequacy of the procedures they use in their year-end processes.
One of them was a mail-out campaign involving 16,000 funds and 1000 practitioners. The decision of who received this correspondence was based upon an analysis of SMSF annual returns and situations where the relevant professional had failed to lodge an audit contravention report when they should have. To this end, the funds that piqued the regulator’s interest were those that reflected unchanged asset values over several years, particularly for items such as direct property in both the residential and commercial sectors, where this occurrence would be considered a little unusual.
In the event the program caused a deal of anxiety in the sector, the ATO specified the exercise was not been designed as a compliance crackdown, but rather an educational process to reinforce what is expected of practitioners when they perform an SMSF audit.
At this point, as a trustee, I could understand you thinking: “This is about the professional space, so what has that got to do with me?” Well the audit is one thing SMSFs need to have performed every year and if this cohort is being hammered for the inadequacies of their practices, that is going to flow back to you.
ATO acting deputy commissioner Paul Delahunty confirmed this fact when addressing delegates at The Tax Institute National Superannuation Conference held last week, when he said: “In terms of what the future holds, we’re now invested in seeing how the sector responds so we will be monitoring the behaviour for trustees and auditors.”
While the ATO has made specific reference to asset valuations, it is also looking at other compliance areas in which it would like improvement.
One of these is the requirement for auditors to perform a title deed search to confirm the parties involved in the ownership of the asset. The response to this obligation has been perceived by some to be a little bit over the top, but what the regulator is seeking to achieve here is, among other things, a guarantee no outside party holds any sort of charge over an SMSF asset – a circumstance not in accordance with superannuation legislation.
But there are even more basic compliance elements the ATO is looking to address as well. One of these is whether individuals have signed their trustee declaration forms – a legal requirement on the establishment of an SMSF. Pretty basic I know, however, I’m sure it’s the straightforward aspects of compliance that really irritate the regulator when they have not been satisfied.
So I think this is ostensibly a warning shot fired at auditors and trustees alike that non-compliance will be viewed dimly. And with regard to valuations, it is even more pertinent in the lead-up to 1 July 2025, which is the proposed start date of the new tax on total super balances over $3 million.
In my experience, the ATO is not unreasonable in its compliance expectations and certainly does not expect trustees to be perfect when running their own super funds. But no doubt it does want the more straightforward compliance responsibilities to be carried out and the exercise seems to me to be a message telling trustees there is no better time to get their SMSF house in order.
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