SMSFs with a history of good record-keeping should be allowed to reduce the scope of their annual audit instead of moving to a three-year audit cycle, according to Pitcher Partners.
The national accounting, audit and advisory firm’s Melbourne director, Brad Twentyman, argued there are more cost-effective ways of reducing red tape and compliance costs for trustees than the federal government’s 2018 budget proposal to allow SMSFs with a history of good record-keeping the choice to move to a three-yearly audit cycle.
Twentyman said while the firm supported measures to reduce complexity and costs for trustees, reducing the frequency of audits was unlikely to achieve the desired policy outcome.
“The nature of audits means total costs are unlikely to be reduced over a three-year cycle because a three-year audit will still need to be reviewed with the same level of attention as an annual audit,” he said.
“The broad policy intention of reducing complexity and compliance costs is welcomed, however, the problem remains that when you conduct the audit in year three you will still have to examine and consider years one and two – it’s just the way audits are.
“The total costs and complexity will not be reduced, just the timing will change.”
He said a more sensible approach would be to reduce the scope of the annual audit for those SMSFs with reasonably straightforward affairs, traditional investment assets and a good compliance history.
“Total costs and fees would be reduced as is the stated policy objective and fund members and regulators would receive comfort that governance and management of the fund remained on track each year,” he said.
Fund auditors would be responsible for deciding whether a fund should qualify for a reduced-scope audit using guidance from the ATO, he added.
Pitcher Partners, which provides audit services to about 2000 SMSFs, has submitted its proposals to Treasury, which is seeking feedback on the plan.