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Accounting, Auditing, LRBA, Regulation

Triennial audit cycle unlikely to proceed

Industry awaiting three-year audit cycle draft legislation.

The likelihood of legislation for the three-year audit cycle for some SMSFs passing through Parliament under the current federal government is low given the likelihood the next election will be held in May 2019, according to an SMSF expert.

Smarter SMSF chief executive Aaron Dunn told a webinar today on the latest technical and regulatory issues affecting SMSFs that the industry is yet to see any draft legislation on the proposal, which the government intended to implement from 1 July 2019.

“I don’t say that with any confidence, but if we’re yet to see draft legislation and therefore we would need a period of time to consult, then we’d need to see that go into Parliament and pass both houses,” Dunn said in his segment on outstanding legislation.

“It would appear very unlikely if you just follow the natural course of events that that would get through under the current government.”

Dunn’s conjecture is based on the fact the government has announced the next budget is slated for 2 April, while the election will be held in May.

“For those of you that are waiting anxiously around that, the logic test I guess would suggest that it would be a struggle to see that occur within such a short period of time,” he said.

Treasury in June announced it would address initial industry concerns on the triennial audit cycle by providing an eight-week feedback period for its discussion paper.

It said it was seeking views on eligibility criteria, major events that will require more frequent auditing and possible transitional arrangements.

The industry had until 31 August to submit responses.

Other outstanding legislation includes the changes around increasing the number of SMSF members allowed in a fund from four to six, with Dunn noting no draft legislation has been provided in respect of this proposal either.

He reminded the industry this is currently just a proposal.

Dunn also said the review into limited recourse borrowing arrangements (LRBA) by the Council of Financial Regulators is under way, with a report expected before the end of the year.

This comes off the back of the 2014 Financial System Inquiry, which recommended banning LRBAs. The government decided not to implement that recommendation, but announced a review into LRBAs three years from when the panel handed down its report.

“So again we just need to wait and see in respect to any further action or response in respect to that,” Dunn said.

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