This is a subject that most people who have a SMSF probably do not give much thought to. However, the audit is the end result of everything that has happened during the year.  So that what you do with your SMSF is then examined by the Auditor and you are given either a clean Audit Report, or the Auditor may have to, in some instances qualify the report which will cause, in most cases, the Tax Office to investigate the fund.

The ATO is auditing a far greater number of Superfunds than it was in the past. They are returning back to the Auditor items where the Auditor has not made a qualification.

We recently had a call from the ATO in relation to an Audit of a SMSF where the Trustee of the fund had apportioned an accounting fee by thirds and allocated one third to the Fund as an expense. The invoice he received did not actually cover work for the fund therefore the payment was considered to be of benefit to the member.

As Auditor I had picked up this minor indiscretion and had advised the money be returned by the member (less than $1000) in the following year.  I believed this transaction to be an honest mistake so I did not qualify my Audit report appropriately and got a rap over the knuckles by the ATO.

My point is, that if minor transgressions such as above, can lead to contact from the ATO and further, could lead to a full investigation you need to be aware that all payments made from a Superfund must be on account of fees, or accounts charged directly to the Superfund, in this way the Auditor is able to give a clear Audit Report.
The same situation arises with the use of Superannuation fund assets. If a member is able to access and use superfund assets then this would have to be reported by the Auditor as the assets would probably be considered to be purchased for the use of the member. If you bought real estate through your Super fund and the real estate consisted of an apartment or a house in a holiday area and the members of the fund used the property, then unless they paid full commercial rent, this would have to be reported. The same thing could apply to where you have invested in other assets which could be utilised by members.

This is placing a greater responsibility on Auditors even though the responsibility has always been there.  Auditors have tried not to qualify a report where they felt that the matter had been rectified or was of such a minor nature that it did not require reporting. The attitude of the Tax Office has changed all that, so that even where a problem has been rectified it still has to be qualified in the Auditor’s report.

My advice is that where you have any doubts as to whether or not a payment or use of a SMSF asset would be considered to be on behalf of a member, then contact you’re Auditor and discuss the matter with him, prior to making such payments or prior to using the SMSF assets.

Any way this is just a quick rundown on the current problems with the audit of superannuation funds and should you have any questions you should contact your accountant, or if you wish to contact us we are only too happy to discuss the matter with you

Next month we will look at a different subject…….