The self-managed superannuation fund (SMSF) sector fears that the Government’s three-yearly audit proposal will compromise compliance quality, SuperConcepts has warned, while also creating a potential burden for the Australian Taxation Office (ATO).
SuperConcepts chief executive, Natasha Fenech, said that auditors and accountants believe that less audits was not the same as less red tape, and making audits less frequent would just create more problems in the long run.
“There is a lot of red tape in the SMSF sector but the problem isn’t with auditing. We feel the Government could be more effective in looking at the steps taken by professionals to verify the financial audit and compliance issues,” Fenech said.
“It’s not really appropriate that compliance checks are removed under the current proposal, because things can go wrong if they’re not reviewed regularly. From our experience, the sooner problems are identified the easier they are to fix.”
Fenech said that “regular touchpoints with SMSF professionals reveal problems before they bubble to the surface”, with the triennial cycle risking that issues would go undetected for longer. At the same time, technology was developing that could enable real-time reporting that would mitigate this risk.
This could make the ATO’s role in managing the risk of tax and regulatory breaches more difficult.
“We are likely to see more breaches being reported to the ATO as issues that might have once been dealt with quickly and easily during the annual audit now won’t be addressed in a timely manner,” Fenech said.
“The consequences are that it develops into a significant reportable event, which then requires ATO resources to assess and action.”
There was also concern amongst SMSF auditors that the Government’s proposal that eligibility for triennial audits was doomed to fail. While SMSF trustees who had received an audit contravention report (ACR) in the last three years would be automatically ineligible, professionals warned that this wasn’t the only consideration.
“The question of eligibility is being hotly debated among our partners, with Tax Agents telling us that only 30 per cent would be eligible. That’s a lot of work that is likely to add costs to the trustees,” Fenech said.
“There might not be an ACR issued but many funds are still issued with management letters by their auditors, which the ATO never hears about and would assume the fund is okay.”
Fenech also said the risk of undetected compliance issues going undetected for longer in a three-yearly cycle could also lead to more ACRs.