The increased use of online banking appears to be one of the main drivers behind the rising number of SMSFs breaching rules around the separation of assets and will require practitioners to be more active in educating clients about how to prevent these errors, according to an SMSF audit expert.
ASF Audits head of education Shelley Banton said breaches of Superannuation Industry (Supervision) (SIS) Regulation 4.09A, which deals with the separation of assets, were among the highest number of reportable contraventions the ATO receives from SMSF auditors via auditor contravention reports.
“Under that regulation, SMSF assets need to be kept separate from the trustees’ personal assets and that includes not only individual trustees, but also directors of the corporate trustees in their personal capacity,” Banton said during a webinar today hosted by company, trust and SMSF structure provider ACIS.
“One of the main things we’re seeing most frequently is withdrawals in error and that is going to increase as banks continue to close down their branches and force customers to use online banking.
“This is where those elderly trustees get hit the most because they don’t understand how it works and can easily click on the wrong account and things can go wrong from there.
“So a lot of hand-holding is going to be required here to help trustees navigate their way and get used to online banking as there is probably going to be breaches along the way which are inadvertent.
“There may or may not be compliance action from the ATO, depending on the circumstances of this breach, and while withdrawals in error is an inadvertent issue, we don’t want to see that become the rule rather than the exception.”
She added another key issue auditors were seeing in regard to separation of assets related to the ownership of insurance policies.
“We are seeing insurance policies that are held in the name of the members only and you can’t transfer a policy over to a fund where it’s in the members personal name because that will be a breach of section 66 [of the SIS Act], which is an acquisition of assets from a related party,” she noted.
