Proper attention needs to be given as to when SMSF trustees sign-off on a fund’s annual return due to the significant compliance implications and associated penalties if the process is performed incorrectly, a technical expert has said.
During an Accurium technical webinar hosted yesterday, specialist adviser Mark Ellem said to this end practitioners needed to acknowledge the declaration their SMSF trustee clients must make when they sign-off the annual return, that being: “I have received a copy of the audit report and are aware of any matters raised therein.”
Further, Ellem warned this declaration means advisers have to ensure trustees have cited the signed audit report before the annual return can in turn be signed correctly.
“Now I acknowledge that it doesn’t say ‘I have received a copy of the signed audit report’. But if it’s not a signed audit report, how does the trustee know that it is the final version of the audit report and that all matters raised by the auditor are in that draft copy?” he said.
“So in my view it has to be the signed audit report the trustees need to receive before they sign the return.”
He noted getting the timing of this process wrong could result in a compliance breach with severe adverse consequences for trustees.
“If they sign the declaration citing the signed audit report, that could be considered intentionally making a false or misleading statement, which is subject to 60 [administrative] penalty units,” he said.
“Recently these units were increased to $222 [each, so the breach could] total $13,320 and again, depending on whether we’ve got individual trustees or a corporate trustee, it could be a greater amount.”
He pointed out he had fielded an argument from an auditor suggesting a signed audit report would not be issued before receiving all the relevant approved documents for the fund, including the annual return, however, he refutes this claim.
“It’s only the return [we’re talking about] and the auditor is not auditing the return. Yes the auditor needs to ensure the provision for tax is a liability or refund is fairly stated in the financial statements, but they’re not auditing the return itself,” he said.