The Australian Taxation Office (ATO) will respond to every auditor contravention report (ACR) it receives this financial year as part of its compliance activities.
“Now that we have the auditor registration [system], so all of the auditors have to be registered with ASIC (Australian Securities and Investments Commission), it means we can put a lot more faith in the auditors, so we’re shifting our focus more on the ACRs,” ATO self-managed super funds assistant commissioner Matthew Bambrick told last week’s SMSF Professionals’ Association of Australia Sydney Chapter breakfast.
“What that means is we’re going to respond to every ACR we receive in the coming financial year.”
The move comes in response to auditor queries about what the ATO does when it receives an ACR. Under the new compliance activity, each report will be risk assessed based on the track record of the SMSF trustees involved.
During the assessment process, each ACR will be deemed to be low, medium or high risk in nature. However, this assessment will not be made purely on the ACR and will also take into account the prior compliance records of the SMSF trustees involved.
“The ones we rate as lower risk will receive a letter from us to say we’ve heard about a contravention, this is the contravention here, once you’ve fixed it, your fund will be okay,” Bambrick said.
The medium-risk ACRs will receive a phone call from the ATO and the course of the call will determine the resulting regulatory actions. If the trustees can indicate they have already rectified the contravention or have a definite plan to rectify it, no further action is likely to be taken.
However, if the ATO feels more attention is necessary after the conversation, the medium-risk assessment of the fund will be changed to high risk.
The funds that are re-categorised into the high-risk group will then receive a letter from the ATO confirming this status.
“The high-risk group will have a comprehensive audit performed on them and we won’t just be looking at what’s been raised in the ACR,” Bambrick said.
The assistant commissioner said SMSF trustees deemed low or medium risk would receive their letters or phone calls within two weeks of the ATO receiving the ACR.
“What this frees us up to do is focus on funds identified more in the high-risk area. So we’ll be looking more at things like schemes to promote present-day benefits or tax avoidance activities,” he said.
“So it gives a chance to focus more on the worst end of town.”
While confirming the ATO’s greater emphasis on ACRs, he stressed the volume of those reports the regulator received represented around 2 per cent of the total number of SMSFs, demonstrating the sector was achieving a high rate of compliance.
