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Auditing

Active disclosure prevents intervention

SMSF trustees must take a more proactive role in working collaboratively with their auditors and the ATO to resolve regulatory issues earlier and in a more timely fashion, according to the ATO.

At the SMSF Association 2017 National Conference in Melbourne last week, ATO SMSF assistant commissioner Kasey Macfarlane and Super Sphere director Belinda Aisbett discussed the challenges faced by the tax office, as well as how trustees are expected to respond when it comes to their compliance and reporting obligations.

A key issue Aisbett noted was a lack of understanding surrounding the real value and merits of the present disclosure regime that formed a key component of the auditor contravention report under the Superannuation Industry (Supervision) Act 1993.

She noted a lack of awareness among trustees of the important role they played in their own reporting and compliance, with greater involvement in the voluntary disclosure process often resulting in better outcomes for the trustee involved.

“I have to admit the whole voluntary disclosure process is a little bit confusing and I didn’t understand why the ATO wanted it, because why would they want the trustees to tell you [about their compliance issues] when you’re asking the auditors to tell you anyway?” Aisbett said.

However, Macfarlane noted the ATO’s voluntary disclosure service was a fulcrum that, together with enforceable undertakings, worked to provide certainty for all parties and helped prevent further intervention from the tax office in cases where its involvement was not needed.

“We provided this early engagement and voluntary disclosure service so that trustees, as soon as they discover there is an issue with their fund, [could be] working with their auditor and adviser to resolve it,” she said.

“The benefit is it allows us to address the issue earlier and their willingness to engage with us … will likely result in a lot less enforcement and serious sanctions than what would otherwise apply.”

She noted the ATO’s consideration of applicable enforcement action and remission of penalties took into account the “willingness” of the trustee to engage and work with the ATO to take positive and prompt action to resolve regulatory issues in their fund.

“Since the service was launched, we’ve had about 120 voluntary disclosures come forward and a relatively large proportion of those have been instances where an SMSF trustee has gotten behind by a year or two in their SMSF lodgements because they did have what was really just a minor issue with their fund,” she said.

“What we’re really trying to do is encourage trustees to recognise and take responsibility for the issues and coming forward and working with us to rectify it.

“We’re not out there to catch trustees in ‘gotcha’ moments and we do recognise that inadvertent mistakes and misunderstandings occur.”

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