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Administration, Auditing, Regulation

Time runs out on three-year audit reform

The federal government has missed its chance to pass its controversial three-year audit cycle reform for select SMSFs before the election is called, according to an SMSF administration service provider.

SuperConcepts education and technical services general manager Peter Burgess suggested since no legislation has been introduced into Parliament or even draft legislation released for comment, the government has run out of time to get this measure introduced and passed.

“Any bills introduced into Parliament but not passed by the time the election is called will lapse and will then need to be reintroduced into the new Parliament,” Burgess said ahead of speaking at the SMSF Association conference in Melbourne this week.

“And if there is a change in government, I don’t think this is a measure which a new Labor government would be inclined to introduce – or at least you wouldn’t think it would be a priority for an incoming government.”

The probability of the three-year audit cycle policy being introduced will depend on whether the coalition is re-elected, he added.

The measure was announced in last year’s federal budget and has been a contentious issue for the SMSF sector.

“The vast majority of the SMSF sector does not support this particular change because we simply don’t believe the benefits of lower compliance cost and red tape will be realised,” Burgess said.

“Instead we will see an increase in the number of SMSFs breaching the rules and a reduction in the number of audit firms specialising in this area leading to lower-quality audits.”

In mid-2018, Treasury released a discussion paper that outlined various key events that would require an SMSF to be audited for that income year even though the fund may otherwise qualify for a three-year audit cycle.

“The idea was to reduce the likelihood of compliance breaches by identifying as many events as possible that would put the SMSF at a higher risk of breaching the rules and therefore should be audited in that income year,” Burgess said.

“The problem is it would be a self-assessment regime so it would be up to the SMSF trustees to identify whether or not one of these particular events has occurred.”

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