The ATO has given indicative approval to a process allowing SMSF auditors to sign off on a fund where the trustees cannot produce an original trustee declaration and rectify any contraventions caused by the situation, according to the Auditors Institute.
Institute director and Evolv chief executive Ron Phipps-Ellis stated the current approach of dealing with the absence of a declaration was at odds with newer ATO guidance around the practical implications of section 104A of the Superannuation Industry (Supervision) (SIS) Act.
“At the core of the issue lies the requirement for trustees and directors of corporate trustees to sign and retain a trustee declaration, confirming their understanding of their roles and responsibilities under the SIS legislation,” Phipps-Ellis explained in a post to members on the institute’s website.
“While the legislation has been in effect since 1 July 2007, the evolving practice of SMSF administration and auditing, alongside ongoing transitions between service providers, has resulted in many original declarations becoming unavailable.”
He noted to date SMSF auditors have dealt with section 104A compliance by reviewing the signed trustee declarations from the year under audit and confirming with trustees they have retained their declaration within the representation letter.
Where this has not taken place and original declarations are unavailable, a current section 104A declaration is being obtained from trustees.
Phipps-Ellis added this practice now differed from current ATO guidance where auditors must sight the signed original declaration and keep it on the audit file, alongside written representations regarding the retention of this document.
“This has placed increased pressure on SMSF auditors, particularly when original declarations cannot be located, often due to changes in accountants, administrators or document management systems over time,” he pointed out.
The professional body has received feedback from the ATO director Kellie Grant regarding the matter.
“We understand that trustees may not be able to satisfy their auditor that they have met the requirements of this provision with respect to both the signing and retention of the declaration. In which case the ACR (auditor contravention report) instructions state that the auditor only needs to report the contravention once, that is, in the year they identify the breach,” Grant said.
“However, if trustees sign a new trustee declaration, this will rectify the breach and meet the record-keeping requirements going forward. The auditor can then report the contravention as one that is rectified and we are unlikely to take any action against that breach.”
While he welcomed the regulator’s response, Phipps-Ellis called for specific ATO guidance that where an original declaration was missing, a new one will rectify a section 104A breach, and a more practical and effective compliance mechanism, such as an annual declaration by trustees as part of the SMSF annual return, should be considered.
