Budget papers reveal that the annual audit requirement for SMSFs will be reduced to three years where trustees have a good history of record keeping and compliance.
The budget papers said that the measure will apply to SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.
The new measure is intended to start on 1 July 2019. However, the government has said it will consult with stakeholders on the proposal.
BDO partner Paul Rafton said this proposal presents some potential risks and puts a lot of onus back onto the SMSF trustee.
“I don’t think it’s such a bad thing having a regular heath check on an annual basis from an independent auditor,” said Mr Rafton.
“It could mean that its three years before the ATO catch up with someone whose compliance history is not as squeaky clean as it used to be. So there’s a three-year window really, if they’ve got a really good record and then for whatever reasons they go off the rails, it might be three years before the ATO and the auditor catch up with them.”
Hayes Knight director Ray Itaoui agreed that the measure is likely to create “practical hurdles” for the industry and that having two years with no audits could present opportunities for creative trustees to manipulate the superannuation system.
“An auditor will also not be able to sign off on the third year without having a level of comfort as to what has transpired in previous years,” he said.
Then auditing standards needs to be amended to accept unaudited opening balance