The ATO has revealed certain fundamental SMSF compliance obligations, including issues with trustee declarations, are common aspects where the procedures of auditors are currently lacking.
To this end, one area the regulator has identified that requires greater audit attention pertains to trustee declarations.
“We commonly see auditors who fail to check trustee declarations have been signed and retained [as is required by] section 104A [of the Superannuation Industry (Supervision) Act],” ATO acting deputy commissioner Paul Delahunty told delegates at The Tax Institute National Superannuation Conference held recently in Sydney.
“Trustee declarations are an important document for an SMSF and it does provide affirmation that trustees as well as directors of corporate trustees declare they understand their obligations in running the fund.”
Delahunty took the opportunity to stipulate the details of the requirement when an SMSF is established or if its structure has been varied.
“Trustees must complete a declaration when they become a trustee, or director of a corporate trustee, for a new SMSF or existing SMSF and it must be signed within 21 days of [taking on the particular role],” he noted.
“Now many of the audit files we have been reviewing have not contained the relevant trustee determinations or the auditor, once identifying they had a trustee determination, didn’t report it correctly and it wasn’t completed within the 21-day [timeframe].”
According to Delahunty, another current issue with audit files relates to the documentation associated with limited recourse borrowing arrangements (LRBA).
“The observation on this one is pretty simple and that is the auditors need to be getting the basics right in terms of the evidence that they gather and hold in their audit files,” he said.
“For LRBAs it’s simple things like copies of the bare trust deed, the purchase contracts and ensuring that the loan contract is in the name of the fund, while stipulating that the loan is limited in recourse against the fund trustee or trustees.
“[These] are examples of the things that we observed are missing as part of the audit files.”
