The federal government should strongly consider requiring SMSFs using a three-year audit cycle to have a “light-touch” compliance check in the non-audit years should it choose to proceed with its audit proposal, an industry body has argued.
In its submission to Treasury’s discussion paper on the three-yearly audit cycle for some SMSFs, drawn up in the wake of the government’s 2018 budget proposal, the SMSF Association suggested the government consider a simplified, principles-based eligibility test.
“We would also suggest an appropriate transition period to three-year audits is needed if the proposal is to be implemented,” SMSF Association chief executive John Maroney said.
Maroney also said the association does not believe there will be a significant take-up of the proposed triennial audit by SMSF trustees as its research indicates SMSF advisers may recommend their clients continue with annual audits to ensure fund compliance.
A survey of association members revealed 89 per cent opposed three-yearly audits, 86 per cent believed they would not reduce costs and 84 per cent said they would recommend their clients continue with annual audits and ignore the proposal.
The association joined others in the industry in reiterating the measure would not reduce costs for trustees.
“In most cases, our members conveyed the notion that SMSF audit fees may, in fact, increase,” Maroney said.
“Auditing three years’ worth of information may not create the desired amount of efficiency because auditors and trustees will lose familiarity with the fund. This would result in further complexity in auditing, confirming and validating transactions that have occurred up to 36 months prior.”
The submission also argued the proposal would affect SMSF audit businesses and may reduce the quality of the SMSF audit workforce, hence affecting the quality of independent oversight of the SMSF sector.
It also said eligibility criteria using triggers to require annual audits may make the current compliance system for SMSFs more complicated and outweigh any reduction of red tape as a result of the measure.