The ATO has included new mandatory labels in the 2026 SMSF annual return specifically aimed at gathering more meaningful information about audit fees and practices.
“The H1 and H2 labels for auditor fees [are new and the ATO has indicated they] are now mandatory. You must complete them,” Accurium head of SMSF education Mark Ellem told attendees of a technical webinar held today.
The H1 label on the SAR relates to the deductible portion of a fund’s audit fee that has been incurred in earning assessable income, while the H2 label pertains to the non-deductible portion of the auditor fee incurred in earning exempt income.
Ellem took the opportunity to expressly point out the circumstances in which the H2 label would be relevant.
“If the fund is claiming ECPI (exempt current pension income), [it means] a proportion of the audit fee will not be deductible because it was incurred in earning exempt income, then you’d need to complete both H1 and H2,” he explained.
The instruction for the SAR stipulates if one of the audit fees is applicable to non-assessable income, trustees are still required to enter a value of 0 into H2.
“The reason for the change is that [the regulator] wants transparency. It gives the ATO clear visibility into the exact audit pricing across the sector,” Ellem noted.
“So it helps regulators spot unusually low fees and for the ATO that may indicate potential poor or incomplete audit work if it’s being done very, very cheaply.”
He recognised there was a further amendment to the SMSF annual return in addition to the aforementioned labels.
“The other change is in relation to completing whether Part A or Part B of an audit report has been qualified. [The ATO] now makes it clearer all modified opinions in independent audit reports should be [disclosed] whether that is a qualified opinion, a disclaimer opinion or an adverse opinion,” he pointed out.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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