A specialist auditor has confirmed there can be sound reasoning behind the fact some SMSF asset values have remained unchanged over a three-year period.
Responding to the ATO mail-out to 1000 auditors regarding 16,000 funds holding assets that had not changed in value over several years, Tactical Super director Deanne Firth noted: “For some [SMSFs] there are very valid reasons for the [asset] values remaining the same, especially when there is [an investment in an] unlisted unit trust that might have the money sitting waiting there for an opportunity. So its value may not change until that opportunity has occurred.
“You could also have [trustees] who loan money to developers and they get their money back at the end [of the project] once that development is complete.”
Firth told delegates at the recent Auditors Institute Auditors Day Melbourne that if auditors recognise a client is in this situation, there is a course of action that absolutely has to be followed.
“There are legitimate reasons for having asset values that are the same for three years in a row, but as auditors just be aware if [assets possess this characteristic], you want to make sure your file has extra notes on it to explain why,” she said.
Further, she warned that if the majority of the 16,000 SMSFs captured by the ATO exercise address this issue, any remaining assets continuing to reflect a constant value will be considered a high audit risk.
To this end, ATO acting deputy commissioner Paul Delahunty recently confirmed while the exercise was originally for education and awareness purposes, the regulator will be monitoring how the 1000 auditors involved respond to the action.
“We will be monitoring behaviour of trustees and auditors as part of understanding the response to the mail-out,” Delahunty said.
“In reviewing how funds and auditors do respond [to the mail-out] over the next six to 12 months by their lodgement of SARs (SMSF annual returns) and ACRs (auditor contravention reports) [will allow us] to be in a position to understand whether there is a risk of non-compliance that we may need to dedicate further time and attention to.”
