ATO, Auditing

Two clear rules for tax agents

tax agents audit rules

The ATO has specified two situations under which it will not allow tax agents to perform an SMSF audit, adding to its practical guidance around the issue.

The ATO has stipulated two clear situations that will prevent tax agents from providing non-assurance services to SMSFs, as well as conducting the fund audit under the amended auditor independence standard.

“There are two clear rules that prohibit firms from providing certain tax services in certain situations [as well as performing the fund audit] and that’s where tax planning and other tax advisory services are provided or where tax services that involve assisting a client in the resolution of a tax dispute are actually provided,” ATO SMSF auditors portfolio director Kellie Grant told delegates at last week’s virtual SMSF Association National Conference 2021.

“So if those certain services require any sort of professional judgment when it comes to doing the tax calculations, or those certain decisions will have a material impact on the financial statements [of the SMSF], then [tax practitioners] shouldn’t be looking to also audit a client [where their] firm has provided those sorts of tax services.”

Outside of the circumstances identified above, Grant confirmed it would permissible for practitioners to provide taxation-related services to an SMSF as well as conduct the fund’s audit.

“If you’re just looking at picking up certain entries from the financial statements and plugging them into the actual self-managed super fund annual return, without looking to make any sort of additional judgments, then it’s fine to actually prepare that tax return for an SMSF client and audit [the fund] without there being any threats to independence,” she noted.

According to Grant, the ATO has fielded many queries about when tax agents can or cannot conduct SMSF audits in relation to compliance with the auditor independence standards.

She warned the seriousness of the issue should not be underestimated considering over half of the auditors the ATO has referred to the Australian Securities and Investments Commission for further enforcement action each year, since 1 July 2013, have issues related to independence breaches.

“So it’s really important auditors understand how to adhere to the independence requirements when conducting [an SMSF] audit,” she said.

During the same session, Grant outlined the evidence the ATO would be looking for accounting firms to provide as proof the auditor independence standards have not been breached.

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