SMSFs currently enjoy some substantial tax concessions, so it makes sense that the Australian Taxation Office is looking for ways to ensure that the rules are followed when it comes to the use of these funds.
Independent SMSF auditors exist to check that people are operating in compliance with the tax rules and to ensure that the integrity of the sector is maintained.
As of July 1 2019 new rules will come into effect, extending the compulsory audit cycle for certain eligible SMSFs from one year to three years.
To be eligible for this change, SMSFs will have to be able to demonstrate that they have provided a clear audit report for three years and that they have consistently lodged their annual returns in a timely fashion.
The hope is that this change will help trustees by reducing the red tape that they have to deal with.
Annual audits can be expensive, especially for bigger funds and funds that are actively engaged in a wide range of investments.
If the fund pays a pension then this adds a new layer of complexity to the audits as well.
While the new requirements will mean that many established funds will be able to submit to audits less often, there are some new complex concepts being added to the audit requirements as a part of the new rules.
These include the total superannuation balance, which requires trustees to determine the market value of the fund's assets on June 30 each year, and the transfer balance cap.
These new requirements make each audit more complex, which is causing some fund managers to question how beneficial the changes will actually be for them.
The typical cost of an SMSF audit was $754 in 2015, and fell to $694 in 2016. Since most funds have a balance in excess of $200,000 this is hardly a significant fee for them to be faced with.
For most people, the coming changes are not really going to affect the bottom line in any significant fashion.
Let's not forget that while the mandatory reporting period may be every three years, most auditors will still want to look at the whole period before signing off on the report.
They are not simply going to review the year leading up to the date that the audit was required.
This means that the cost for the audit is likely going to increase by a significant amount.
Even if companies are acting in good faith, should something come up during the three-year audit, it is going to be more costly to fix it then, compared to fixing it immediately after the breach occurred.
One of the positive things about regular monitoring is that it encourages fund managers to act ethically at all times
This means that when things do go wrong they are easier to fix.
Fund members have little recourse if things go wrong, so careful management is essential, and these changes could be ill-advised.
If you are looking to establish a Self Managed Super Fund, or need to have your Self Managed Super Fund audited, then look no further than SMSF Pro.
SMSF Pro has years of expertise in the Self Managed Super Fund arena and is able to conduct quick and independent SMSF audits for a flat fee.
Please call us today on 1300 023 374 or message us through our website https://smsf-auditor.com.au/contact/ for all your Self Managed Super Fund requirements.