The current oversight around preservation age and conditions of release made by SMSF trustees will only worsen with the introduction of triennial audits for cleanskin funds, an industry auditor has warned.
“The current preservation age is 56, not 55, so we’re currently having some [issues] in terms of the inquiries we’re getting from our trustee clients who are taking their money out this year, when they haven’t met age 56,” ASF Audits technical services executive general manager Shelley Banton told this month’s SMSF Association Local Community Event in Sydney.
“We’ve had less and less information come through from the super reforms and the budget about the preservation age, so we are seeing issues with illegal early access happening and it’s only going to get worse as we go down subsequent years – as we see the preservation age increase to 60, another four years.”
Banton underscored an important feature of the audit process is auditors have to inform the ATO of circumstances where a contravention may have occurred, has occurred or is occurring.
“We don’t get any discretion about that,” she said.
“So it’s very interesting when we’re talking about the triennial audit that people are suggesting to do mini-audits, like a review, in the intervening years so that by the time we get to year three, we’ve got it all under our belt.
“Now that’s all well and good, but what happens if you find a contravention in year one as the auditor?
“Technically, you’re obliged to let the ATO know, so it may not as be as cut and dry as we think these triennial audits will be.”
It was vital trustees do not further underestimate or have unrealistic expectations of the audit process during audit time, she added.
Further to trustees making mistakes with their preservation age, she revealed one of the biggest misconceptions was that once preservation age was reached, the trustee automatically passed a condition of release.
“That’s true if you’re age 65 or over, but not if you’re under 65, where you can start a TRIS (transition-to-retirement income stream), but in order to receive an accounts-based pension under 65 you need to meet a condition of release,” she said.
“We see a lot of general pension establishment documents coming through which have this issue, so in these situations we need to ask for extra documentation in terms of what condition of release the trustee has met in those circumstances.
“It’s about getting the trustee back on the path to rectification as quickly and as painlessly as we can.”
