SMSF AUDIT CYCLE: MORE THAN ONE WAY TO SKIN A RABBIT
The assertion that moving self-managed superannuation funds’ (SMSF) annual audits to a three-year cycle will reduce compliance costs for trustees may be flawed; or it could be a cost deferral at best, according to the Institute of Public Accountants (IPA).
“The Government’s proposal to change the annual audit requirement to a three-yearly cycle for SMSFs with a history of good record-keeping and compliance may be very well intended but could well be misdirected,” said IPA chief executive officer, Andrew Conway.
“There are other ways to reduce the red tape involved in managing SMSFs.
“A well-functioning SMSF sector is a by-product of good regulation. The SMSF auditor plays a vital role in providing the regulator with assurances that SMSF trustees are playing by the rules.
“According to the latest ATO statistics, the percentage of the SMSF population with auditor contravention reports (ACRs) is approximately two per cent of all SMSFs each year.
“Having one audit every three years that covers the three year period may seem more efficient but may not translate to cost savings. The question needs to be asked if the potential cost savings, if any, are worth the risk of SMSF trustees becoming non-compliant.
“Does the Government want to put at risk the current record of good compliance?
“Not working with trustees in the unsupervised (unaudited) years may result in an increase in contraventions if this measure proceeds. Not addressing contraventions on a timely basis can result in the costs growing exponentially; as well as presenting a systemic risk.
“The annual audit cost may be begrudgingly paid by trustees but most trustees would see this as a form of insurance as the penalties imposed by the ATO for contraventions can be significant.
“Without the annual and timely audit oversight, we are concerned that the low rate of contraventions may start to reverse, for the sake of a potential small reduction in costs over time. A loss of integrity in the SMSF sector is simply not worth the risk.
“We urge the Government and regulators to look at alternative ways to reduce the compliance burden and cost associated with SMSFs,” said Mr Conway.