SMSF administrator and software provider SuperConcepts has highlighted triennial audits will be counterproductive to technological improvements that mean SMSF audits can occur more regularly.
“It’s not really appropriate that compliance checks are removed under the current proposal because things can go wrong if they’re not reviewed regularly,” SuperConcepts chief executive Natasha Fenech said.
“From our experience, the sooner problems are identified, the easier they are to fix.
“We strongly believe there needs to be more regular audits rather than less, and technology is rapidly enabling a real-time process for that to happen.”
Fenech revealed auditors and accountants involved in SMSFs have told the firm that having fewer audits was not the same as less red tape, and will create more problems in the long run.
“There is a lot of red tape in the SMSF sector, but the problem isn’t with auditing,” she said.
“We feel the government could be more effective in looking at the steps taken by professionals to verify the financial audit and compliance issues.”
She added while the ATO will continue managing the risk of tax and regulatory breaches, this could be made more difficult by the three-year audit proposal.
“We are likely to see more breaches being reported to the ATO as issues that might have once been dealt with quickly and easily during the annual audit now won’t be addressed in a timely manner,” she noted.
“The consequences are that it developed into a significant reportable event, which then requires ATO resources to assess and action.”
She warned the self-assessment aspect of the three-year audit proposal was doomed to fail despite the apparent safeguards.
Under the policy, SMSF trustees who have received an audit contravention report (ACR) in the past three years would automatically be ineligible for the proposed three-year audit cycle.
But professionals have said an ACR is not the only consideration, Fenech noted.
“The question of eligibility is being hotly debated among our partners, with tax agents telling us that only 30 per cent would be eligible – that’s a lot of work that’s likely to add costs to trustees,” she said.
“There might not be an ACR issued, but many funds are still issued with management letters by their auditors, which the ATO never hears about and would assume the fund is okay.
“It’s not as simple as whether an ACR has been issued when regular touchpoints with SMSF professionals reveal problems before they bubble to the surface.
“Real-time compliance and efficient continuous audits will help SMSF trustees and administrators keep easier tabs on the health and compliance of their fund, and the tech sector is increasingly making this possible.”
