The ATO has encouraged SMSF auditors to correctly list any contraventions they identify in the year they are found so provide a clear picture of fund and trustee compliance to indicate whether enforcement action should be taken.
The regulator outlined what steps should be taken at specific times by practitioners in new guidance it released earlier this week on how to complete an Auditor Contravention Report (ACR).
It stated a contravention requiring to be reported was either an action prohibited under the Superannuation Industry (Supervision) (SIS) Act or Regulations or inaction resulting in a trustee not meeting their obligations under those provisions.
“We rely on complete reporting from SMSF auditors to understand fund compliance year to year,” the guidance stated.
“Complete reporting requires auditors to report contraventions in the year they occur and in all following years that the contravention remains unrectified.
“This includes where the auditor is aware that we have advised the trustees that we would take no further action, at that time, in relation to the contravention.
“While no further action may be appropriate in one year, if we receive information that a contravention remains unrectified in following years, we may choose to take a different compliance approach with that fund.”
The ATO recognised some contraventions only occur at a specific point in time and could not continue in future years noting auditors should report those accordingly.
“You should report these contraventions in the year they occur (or when you first become aware of them) but not in subsequent years.
“Examples of contraventions that should be reported in the year they occur and not in subsequent years (unless repeated) include contraventions of section 66 [acquisition of assets from a related party], section 103 [maintaining minutes and records], section 104A [signing a trustee declaration within 21 days of becoming a trustee] of the SIS Act.
“Section 103 and section 66 contraventions are unable to be rectified, so these should always be reported as unrectified.”
The guidance also reiterated what actions an auditor should take in regard to section 104A contraventions where they have no evidence an existing or new trustee client signed a declaration within 21 days of appointment.
“The auditor should lodge an ACR reporting an unrectified section 104A contravention unless they are aware that one has already been lodged for that contravention.
“If the trustee signs a new trustee declaration before the auditor lodges the ACR, the auditor can report the section104A contravention as one that is rectified.”
