Auditing, Compliance, Property

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Conventional practices regarding information about an SMSF residential property for the annual audit may no longer be considered sufficient.

A specialist SMSF auditor has advised his peers to consider compiling comprehensive information about a residential property held inside a fund to ensure trustee compliance with certain rules, such as those governing transactions with related parties, even if doing so goes beyond previously accepted practices.

To this end ARC Super director Ashley Course noted auditors may well have to consider securing a title search for a real estate asset and more detail than real estate agents normally provide.

“I had a member in a training session once who was referred to ASIC (Australian Securities and Investments Commission) by the ATO to have her licence reviewed because she didn’t obtain a title search and she didn’t obtain evidence to verify who the tenants were. How do you know if there is a related [party] tenant in there or not if you don’t have evidence [confirming it is not the case]?” Course told attendees at The Auditors Institute SMSF Auditors Day 2024 recently hosted in Sydney.

“So keep that in mind going forward. Get a real estate agent’s statement for the residential property where they have the ability to put the tenant’s name on it,” he said.

Course revealed he has adopted the practice of having real estate agents provide this level of detail in addition to the confirmation of how much rent was received from letting the property for a particular period of time.

The principle of seeking additional information also applied to other SMSF assets in light of recent well publicised cases of fraud, he pointed out.

“I always have, when it’s material, obtained a share registry print out for listed shares[But] what I’m doing now, even if it’s immaterial, I go and get one to make sure [the ownership] is correct,” he confirmed.

“I don’t know much about the Caddick case but the bits and pieces that you read [indicate] the investigator who came in to look at this case said not one single document they saw was legitimate.

“If I read correctly she doctored up everything…but it doesn’t take long to go a registry to make certain [share holdings are legitimate],” he concluded.

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