The federal government’s 2018 budget measure to allow SMSFs with a good compliance and record-keeping history the ability to switch to a three-yearly audit cycle will potentially increase costs for trustees and make the audit process more burdensome, according to an auditor.
TriSuper Auditors director Joel Curry warned a three-year audit cycle could result in errors remaining undetected for longer and resolving three-year mistakes could become more time consuming and expensive.
“If the previous years’ tax returns need to be amended, that’s an expensive process. In addition, the trustees could be liable to pay a huge amount of extra tax in the audit year to balance the account,” Curry said.
“What happens if they simply don’t have the cash to pay the unexpected tax?”
He told selfmanagedsuper he foresees various issues with a three-year audit cycle, including poor record-keeping, loss of documents and lack of timely identification of compliance breaches, especially if the policy requires auditors to conduct audits for all of the three years together.
“I see problems there in terms of accountants having to keep records for three years and then having those records available at the end of the third year sent through to the auditor,” he said.
“I see problems where people may change accountants within those three years. How do we go back and get information from the old accountants, which can be hard at the best of times?
“I see problems with people remembering what a certain transaction might have been three years ago. It’s hard to remember 12 months sometimes, let alone three years.”
If a trustee commits compliance breaches either intentionally or unintentionally, auditors have the opportunity to identify them during annual audits, but this policy will mean auditors will have to collect three years’ worth of data in the one hit, he noted.
The measure will result in accountants having to engage in diligent document keeping and ensuring three years’ worth of records are readily available and stored in a format and location where they can easily be accessed.
This could increase red tape for accountants in an effort to ensure trustees are compliant during the three-year gap in the audit.
“The trustee is going to have to take more of an active role in self-determining whether they’re compliant,” Curry said.