A superannuation lawyer has highlighted a change to the ATO’s approach SMSF auditors need to acknowledge in relation to how they determine whether a charge over a fund asset exists.
Specifically DBA Lawyers special counsel Bryce Figot referenced to Quick Code (QC) 45566 on the ATO website that sets out a checklist of the minimum expectations it has when assessing approved SMSF auditors, and in particular, a significant shift regarding title searches of fund assets.
“Here’s what it currently says [as to its] minimum expectation of audit checks and this is in relation to [Superannuation Industry (Supervision) (SIS)] regulation 13.14 – funds must not have a charge over its assets unless there is a relevant exception,” Figot noted.
“So how should the auditor be checking that? [The ATO says] the auditor should obtain evidence that the trustees have not given a charge over, or in relation to, a fund asset by seeking written confirmation, so [that is a reference to a] trustee representation letter, from trustees and carrying out the following checks – property title search,” he told attendees of the SMSF Association Audit Day 2024 held recently.
“What did it used to say because this changed? It used to say the auditor should obtain evidence the trustees have not given a charge in relation to a fund asset by seeking confirmation from trustees that they have not [done so] in the trustee representation letter. [But] if the auditor has reason to suspect there might be a charge, then they need to do a title search. That’s a big change.”
Figot pointed out the change in the ATO’s attitude toward SIS regulation 13.14 occurred in 2019 but has not been widely discussed within the industry. He also recognised relevant regulation itself had not been amended.
Further he revealed how often a title search for SIS regulation 13.14 purposes is required, although not stated specifically by QC45566.
“The ATO’s expectation is every audit, every year a new title search. But the first time it ever publicly stated [this requirement] was on 17 August 2023 [when it] released a new web page in which it expressly stated you, the auditor, should obtain evidence annually by checking the property title for encumbrances on real property,” he said.
In addition he warned the regulator has already noted compliance cases over the last 12 months have identified a number of auditors are not do this.
