The ATO has reminded SMSF auditors the need to seek evidence for the separation of assets held by trustees inside their fund even where that takes place through non-standard procedures.
The regulator gave the instruction in an update on its website which stated SMSF auditors had an obligation to obtain sufficient appropriate audit evidence that a fund had ownership of its assets and its trustees were complying with the separation of asset rules in the super laws.
“Regulation 4.09A of the Superannuation Industry (Supervision) (SIS) Regulations requires trustees of SMSFs to keep the money and other assets of the fund separate from those held by [themselves] personally, or by a standard employer-sponsor or their associates,” the ATO stated.
“This is a prescribed operating standard all trustees must comply with for the purposes of section 31 of the SIS Act.”
It noted for SMSF trustees to comply with their obligations they had to ensure assets were recorded in a way that showed those items are separate from the trustees’ personal or business assets and were legally owned by the fund.
The ATO recommended assets should be held in the name of the trustees ‘as trustees for’ the fund but where this was not possible, due to state or territory laws, the auditor’s obligations remained unchanged.
“Where this is the case, we still expect auditors to obtain sufficient appropriate audit evidence that the assets are held by the trustees beneficially on behalf of the fund and are kept separate, and are distinguishable, from the assets the trustees hold personally,” it specified.
“For example, the trustees may be able to provide evidence of a declaration or acknowledgment of trust over property. If trustees don’t have this evidence readily available, they should seek legal advice about how they can obtain this.”
The ATO pointed out failure of an SMSF trustee to comply with SIS regulation 4.09A was a reportable contravention and trustees had to be notified in writing as did the regulator via the SMSF Independent Audit Report if the contravention was material, and via the Audit Contravention Report (ACR) if the reporting criteria was met.
“Even if the circumstances do not result in a contravention of regulation 4.09A, it may still be considered prudent management of the fund that the trustees take steps to have an asset held or titled in a certain way to ensure it is adequately protected,” the update explained.
“You should consider whether it is appropriate to bring it to the attention of the trustees via a management letter, and report the issue to us via an ACR.”
