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ATO, Auditing, Regulation

New audit cycle aimed at “basic” SMSFs

Government reveals types of SMSFs that suit triennial audit cycle.

Assistant Treasurer Stuart Robert has revealed the exact type of SMSF on which the proposed three-year audit cycle is founded.

Speaking at the Self-managed Independent Super Funds Association Annual SMSF Forum in Melbourne last week, Robert told delegates: “There is a reasonable argument to suggest that a self-managed super fund that is a basic fund in equities or cash that has got a strong record of compliance with no adversities could seek to go to three years.”

He qualified the statement, stipulating if a fund entered into a limited recourse borrowing arrangement to buy property or had an allocation to exotic investments, it would no longer be eligible for the less frequent audit cycle.

“So if you had a self-managed super fund that just had cash in it full stop, then you wouldn’t need [an audit] every year [and] three years will be just fine. Or [for a fund with just] basic equities, [three years] will be just fine,” he said.

However, the Member for Fadden was challenged as to the wisdom of this assumption.

SMSF Blueprint founder Julie Dolan said: “By saying that the assets are in cash or in shares inside the fund is simple and nothing is going to happen in the fund is a little narrow.

“There are a whole lot of other triggering events that can cause non-compliance issues.”

Dolan cited errors in drawing down the required minimum pension and not adhering to some reporting obligations as elements that could easily create compliance problems for SMSFs with the simplest of investment portfolios.

Robert replied: “In those circumstances I agree with you completely.”

The Assistant Treasurer was questioned further and warned about the government’s notion of an SMSF being simple and thus requiring fewer audits just because it had a cash-only portfolio.

“Some of the biggest breaches I’ve seen as an auditor is where a fund just has cash because the assets are so liquid it’s so tempting to take the money out of the fund, fund the business and put it back before the year end,” Assured Super founder Sharif Eldebs said.

“So you can have significant issues if you’ve just got cash or direct shares – something that is very liquid.”

In response, Robert stated: “All of those points are germane, well considered and have been in the mix in terms of where we are on that.”

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