The ATO will embark on an annual check of the use of SMSF auditor numbers (SAN) after it found nearly 1500 possible cases of misuse as part of a compliance program undertaken earlier this year.
Addressing ClassConnect 2019 in Sydney today, ATO SMSF future client experience director Edward Chung said the regulator’s SAN compliance program contacted 5445 auditors, during March to May, and provided them with a list of funds that had reported the auditor’s SAN in the fund’s 2017/18 return.
“When we first started looking at this issue last year, we investigated 100 cases of SAN misuse and what we found was 15 per cent confirmed cases of SAN misuse,” Chung said, adding the program conducted earlier this year found more areas of concern.
“To date we have received close to 3000 responses to our mail-out and we now have 1445 instances of SAN misuse to investigate connected to 626 tax agents,” Chung said, updating numbers released earlier this year by the ATO.
He said the ATO was concerned about the behaviour and its possible implications for other practices undertaken by auditors and tax agents.
“In a recent and extreme case, a tax agent’s deliberate SAN misuse was just the tip of the iceberg. The tax agent admitted to deliberate misuse of SAN for all his SMSF clients and we found serious misconduct such as refund fraud, misappropriation from trust accounts and client theft,” he said.
“While we do consider this is an extreme case, it is likely when an agent does engage in deliberate SAN misuse, it is an indicator there may be further issues with their work practices.”
The ATO would be conducting further mail-outs to auditors and would be checking SAN usage into the future, he said.
“Given the success of the SAN misuse compliance action, we will be doing another mail-out in September and October this year and we intend to continue doing this activity every year going forward,” he said.
“When we find misuse is due to a genuine mistake, we will work with the trustee or tax agent to correct the error. When the abuse is deliberate and no audit has been completed, we will seek to impose penalties and refer to the Tax Practitioners Board, and we will also consider prosecution action.”