The ATO has referred nearly 90 tax agents to the Tax Practitioners Board (TPB) in relation to behaviour around SMSF auditor number (SAN) misuse as it continues to investigate around 500 instances of misuse reported by auditors.
The regulator released new numbers from its SAN misuse compliance project, adding to initial figures released in July 2019, which showed the ATO had received around 2800 responses from SMSF auditors, in which 420 auditors confirmed 1445 instances of SAN misuse connected to 1685 funds and 626 tax agents related to SMSF annual returns (SAR) for the 2017 and 2018 income years.
In the update released today, the ATO stated that in September 2019 it had contacted the tax agents who had prepared the 2017 returns and found around 1000 funds had misreported the SAN inadvertently. This usually occurred due to SAR software rolling over a previous auditor’s details and the tax agent failing to check the correct current year auditor was reported before lodging the return.
The ATO also noted 74 tax agents, representing 106 funds, had failed to respond to a follow-up request in December 2019 and will now be referred to the TPB, along with 15 tax agents who had already been referred to the TPB in 2019/20 after the ATO found 154 funds deliberately misreported an auditor’s SAN.
“We’ve also referred tax agents for prosecution action in more serious cases of deliberate SAN misuse, including where agents have retained audit fees without arranging an SMSF audit or have forged auditors’ signatures on the audit report. So far, criminal prosecution action has begun against one tax agent,” it said.
The ATO added that 500 incidences of SAN misuse were still under investigation for 2017, including cases connected to tax agents who have not responded to the ATO’s request for information, and that it had received around 2100 responses from auditors related to the 2018 income year.
These responses had been received in October 2019 and 137 auditors confirmed 832 instances of SAN misuse connected to 832 funds and 230 tax agents.
While only 40 per cent of auditors responded to the 2018 mail-out compared to 2017, the ATO added “it’s encouraging to see there’s been a significant decline in the number of auditors confirming instances of SAN misuse” and reminded auditors to respond to the ATO each year.
“While we assume those auditors who haven’t yet responded to our lists for the 2017 and 2018 income years didn’t detect any problems with the use of their SAN, we still encourage them to email us to confirm this was the case,” it said.
In related news, the ATO has also contacted 109 registered SMSF auditors who had not been reported as such on an SMSF annual return (SAR) in the past five years, seeking confirmation they were still active in that role.
The auditors were contacted in May last year and asked to provide evidence of SMSF audit work they had undertaken since 2014 and as a result of these inquiries, 35 auditors voluntarily cancelled their registration, notifying the ATO they had not been performing audit work and no longer wanted to remain registered.
A further 31 auditors provided evidence they had conducted audit work and maintained their continuing professional development and professional indemnity insurance obligations to support their request to remain registered SMSF auditors.
Details of the remaining 43 SMSF auditors who did not fully respond to the ATO were passed on to ASIC, which has since advised the ATO that 35 auditors had their registration cancelled, one auditor had voluntarily deregistered and seven remained under investigation by the corporate watchdog.