BDO Australia’s superannuation partners have written to new federal Treasurer Josh Frydenberg and Assistant Minister for Treasury and Finance Zed Seselja to direct their attention to the significant unintended consequences of the introduction of a three-yearly audit cycle for SMSFs.
BDO national leader for superannuation Shirley Schaefer and superannuation partner Paul Rafton have signed the letter to Frydenberg and Seselja.
Schaefer noted: “With just three days to go until consultation on these changes close, we’re asking the new minister and assistant minister to take a fresh look at the proposal and apply some common sense.
“The suggestion of a three-year audit cycle for SMSFs would be a ticking time bomb for the industry.
“The legislation was introduced in an effort to cut red tape and bureaucracy, but our professional view is that the move from annual audits to a three-year audit cycle is fraught with danger.”
Rafton highlighted the two biggest issues with the proposed audit change.
“Three-year cycles could result in it taking up to four-and-a-half years until a breach is detected,” he warned.
“At that late point in the game, where does this leave the trustee and the auditor? Too much can happen over a three-year period with significant risk in leaving audits for too long.”
Secondly, apart from a very small number of SMSFs, there is likely to be very little red tape reduction or cost saving with the three-year cycle, he said.
“In fact, we estimate that there could be a significant increase in SMSF audit costs,” he said.
“The auditors we’ve talked to have indicated that in order to fulfil their requirements of review, three years into one review will require them to undertake even more extensive validation and verification of fund assets over the preceding two years.”
Treasury’s submission period for the three-year SMSF audit consultation closes on 31 August.