Over 40 per cent of the funds connected to instances of SMSF auditor number (SAN) misuse currently being investigated by the ATO did not receive their audits for the 2018 financial year.
In an update on its website, the ATO stated 358 of the 832 funds that had been highlighted as being connected to SAN misuse had not received an audit despite having an SMSF annual return (SAR) lodged by the fund’s tax agent for the 2018 income year.
The ATO commenced its investigation into the preparation of the funds’ SARs after its SAN misuse mail-out for the 2018 income year drew responses from auditors confirming instances of SAN misuse connected to 832 funds and 230 tax agents.
According to the regulator, 42 of the funds reported by auditors for being connected to SAN misuse were later confirmed by the auditor as not having been connected to SAN misuse after all.
“Forty-two funds actually had the correct auditor details on the SAR as the tax agent provided copies of the independent auditor’s report and these auditors confirmed they were in fact the auditor of the fund and they had made an error when reporting SAN misuse,” it said.
“We are concerned that in relation to the 2018 SAR mail-out, a number of auditors later confirmed that they had initially reported SAN misuse in error after the tax agent confirmed they were the correct auditor on the SAR.”
The regulator advised auditors to exercise caution when checking their client lists for the next SAN misuse mail-out in order to prevent future errors with SAN misuse reporting.
It also announced its SAN misuse mail-out for the 2019 income year would commence in early September.
Highlighting the 40 per cent response rate to its previous mail-out, it urged auditors to check their lists and respond whether or not they found their SAN had been misreported on a 2019 SAR.
“Even where the lists reveal no misreporting, auditors should still confirm this with us so we can be reassured that the funds in the list received an audit,” it said.
Last month, ATO SMSF auditor portfolio director Kellie Grant said recent action taken by the Tax Practitioners Board against tax practitioners for fraudulently reporting a SAN, including its decision to ban a Gold Coast-based tax agent for four years, would serve as a deterrent for other practitioners.
