The financial threshold test for reportable contraventions should be increased or removed as it too low and has not been indexed since its introduction, according to an SMSF auditor.
Tactical Super director Deanne Firth said the sixth and seventh tests, which are to be applied by SMSF auditors when reviewing a fund, are no longer fit for purpose and have not changed despite efforts for them to be revised.
The tests state that where the value of all contraventions are more than 5 per cent of the value of the fund’s total assets, they should be reported in tables 1A and 1B of an audit report, and where the dollar amount is more than $30,000, all identified contraventions are to be reported.
Firth noted these thresholds were easily met by some funds breaching the in-house asset rules and were no longer representative of the balances held by many SMSFs.
“We have spent a lot of time trying to get the ATO to index this or take it out because it’s been at $30,000 for a long time and when it was set, that was 5 per cent of a $600,000 fund,” she said during a presentation at the recent Auditor’s Institute SMSF Auditors Day in Melbourne.
“Over time, these funds have increased significantly and we have million-dollar funds and for $30,000 they have got a contravention.”
She said the institute had made representations to the ATO and had noted a proposal to change the threshold.
“We said we have an index for contributions and for many other things, so why not index this or take it out completely because if it is a breach under $30,000, we still have to report them under the other behaviour tests,” she said.
“It’s here to stay at this point and we have asked it be raised again by the auditors’ stakeholder group that meets with the ATO.”