SMSF administrator and software provider SuperConcepts has strongly warned against leaving trustees at risk of mistakes and potential fines under the proposed three-year audit regime.
“We have deep concerns that trustees might be exposed to breaches through errors made over such a long period as three years. That’s a lot of transactions to get right and it’s a lot easier to deal with mistakes when they’re found earlier,” SuperConcepts chief executive Natasha Fenech said today.
“Mistakes happen, just look at the 2000 SMSF trustees who made excess transfer balances by 30 June.
“It is true that trustees want an easier and cheaper way, and it is politically tempting to consider that auditing every three years helps achieve this.
“But the proposed policy opens ordinary citizens to greater complexities in their SMSF if things aren’t picked up as early as possible.”
Furthermore, the federal government’s proposal states that the eligibility for a three-yearly audit is based on self-assessment by trustees.
“If you’ve never been late with a SAR (SMSF annual return) in the past three years, you’re entitled to feel eligible under the current proposal,” Fenech said.
“We have concerns that under the three-year audit, trustees will be exposed to potentially higher costs to rectify any issues that are detected in year one or two.
“The added time compounds the costs and effort required to rectify this and that would mitigate any convenience of less frequent audit cycles.”
She said SuperConcepts believes only regular auditing can help mitigate these risks and ensure ongoing compliance.
Possible key events include the commencement of a super income stream by a member for the first time, the death of a member, the addition or removal of a member, receipt of non-arm’s-length income and the commencement or maintenance of a limited recourse borrowing arrangement.