BDO Australia said its superannuation partners have written to the new Federal Treasurer, Josh Frydenberg, and Zed Seselja, Assistant Minister for Treasury and Finance, to flag the unintended consequences of the introduction of a three-year audit cycle for self-managed super funds (SMSFs).
Shirley Schaefer, national leader for superannuation, together with superannuation partner, Paul Rafton, signed the letter to the new ministers.
Commenting on the proposed changes, Rafton said the suggestion of a three-year audit cycle for SMSFs would be a “ticking time bomb” for the industry.
“The legislation was introduced in an effort to cut red tape and bureaucracy, but our professional view is that the move from annual audits to a three-year audit cycle is fraught with danger,” he said.
Rafton said the first big issue with the proposed changes was that three-year audit cycles could result in it taking up four and a half years until a breach was detected.
“At that late point in the game, where does this leave the trustee and the auditor? Too much can happen over a three-year period with significant risk in leaving audits for this long,” he said.
The second big issue, Rafton said, was that except for a very small number of SMSFs, there was likely to be very little red tape reduction or cost savings with a three-year cycle. BDO estimated that there could even be a significant increase in SMSF audit costs.
“The auditors we’ve talked to have indicated that in order to fulfil their requirements of review, three years in one review will require them to undertake even more extensive validation and verification of fund assets over the preceding two years,” he said.
BDO’s Schaefer asked the new minister and assistant minister to take a fresh look at the proposal and “apply some common sense”.