Changing the frequency of Self-Managed Super Fund (SMSF) audits
The last federal Budget contained a measure to change the frequency of Self-Managed Super Fund (SMSF) audits from annual to every three years. This would only be available to SMSFs with a clean record over the previous three years.
The vast majority of SMSFs use an accountant to keep their books and prepare their annual tax returns. Tax returns remain annual, by the way. We can’t have too much of a good thing.
Once the accountant has prepared the SMSF’s accounts and tax return, they are sent off to an auditor.
Both the accountant and the auditor bill the SMSF for their services.
It is also possible for an SMSF trustee to prepare the accounts and tax return themselves. A minority do this, and save a lot of money that way. However, you can’t cut out the auditor.
This new measure sounds like a good idea, but there are a few issues SMSF trustees need to carefully weigh up, especially those who prepare their own accounts and tax returns.
Once the measure becomes active, audits conducted for SMSFs on a three-yearly audit cycle will cover all of the three preceding years. This means that it is highly unlikely that you will go from spending, say $500 annually, to spending $500 every three years. The audit will be bigger. The fee will almost certainly be higher.
Also, with less work annually to keep auditors busy, the industry might shrink, meaning less competition and therefore higher fees.
And if you are preparing your own accounts and tax returns, you might actually want an auditor to check your work every year. The Government has already said that that will be an option SMSF trustees have.
If during any financial year your SMSF experiences a “key event”, it must be audited for that year irrespectively. Key events are such things as starting up paying a pension to an SMSF member.
The industry is doing everything it can to limit the number of SMSFs eligible for three-yearly audits. It is also canvassing phasing this new measure in, so that not all eligible SMSFs suddenly go to three-yearly audits. This transition would allow the industry to shrink without too much incident.
The federal Treasury has published a consultation paper on its website. Anyone interested can make a submission. Submissions are due by 31 August 2018.