News 08/09

Super Concepts e-SuperUpdate provides you with technical tips and updates on Self Managed Superannuation Fund topics of interest.

Recent changes to superannuation have introduced new rules for self managed superannuation funds and additional requirements to report fund breaches to the Tax Office.

This means that an auditor or actuary is required to report contraventions of the SIS legislation for any reports lodged with the ATO from 1 July 2008. It applies regardless of the financial year to which the contravention relates.

Trustees are now required to lodge a single annual return which combines income tax information, regulatory information and details of contributions received for fund members. In addition, if the fund has breached legislation the fund's auditor or actuary is required to complete a contravention report which is sent to the ATO.

The information reported depends on the length of time the fund has been in existence. For new funds an auditor is required to report all breaches of the superannuation rules in the first 15 months of the fund's existence. Auditors of other funds are required to report breaches, however, the ATO has defined thresholds before particular breaches are included in any report. The aim of the thresholds is to standardise the types of breaches reported and to remove some of the inconsistencies that arose under the previous audit requirements.

When a breach has been identified the auditor or actuary reports the breach on an 'events basis' rather then a 'breach basis'. Each 'event' may be the result of more than one breach of the legislation. For example, a superannuation fund may have borrowed money to purchase an investment that was not permitted under the superannuation rules. The whole transaction relating to the borrowing would be treated as one event even though there may be a number of breaches of the superannuation rules involved.

The Contravention Report can be lodged online by using the Tax Agent Portal and Business Portal. It is possible to lodge the contravention report in hard copy. However, the ATO will only accept an original of the Contravention Report as the form is scanned by using an optical character recognition system.

Auditor Competencies

In addition to the new reporting requirements for breaches, new competency requirements apply to accountants who audit SMSFs from 1 July 2008. These requirements are based on the auditor meeting standards which show they are up to date and have the knowledge and skills required to undertake the audit of an SMSF.

If the accountant audits SMSFs and is a member of CPA Australia, the Institute of Chartered Accountants in Australia or the National Institute of Accountants there are five key audit areas in which they are required to be competent. In addition, any member of these organisations must:

• hold a practicing certifiacate issued by their professional accounting body;
• have the appropriate professioanl indemnity cover;
• undertake a minimum level of continueing professional development; and
• ensure that proper supervision is provided to staff who undertake work on behalf of the auditor.

The minimum level of continuing professional development involves 8 hours of superannuation training, 8 hours of financial statement training or compliance audit training, and 4 hours of financial accounting training. The key knowledge requirements that must be met by the auditor include the relevant accounting standards and an understanding of the SIS Act and Regulations as they apply to self managed superannuation funds.

New Penalties

There are a number of new penalties which apply to self managed superannuation funds. New types of penalties can be imposed for late lodgement of the annual return, late payment of tax and superannuation return levy.

All self managed superannuation funds are required to have an audit report signed by a qualified auditor. In the past the usual practice was to have the audit completed by the time the annual returns for the fund were lodged, however, this was not always the case. It is now a legal requirement that any audit of a self managed superannuation fund is completed prior to the lodgement of the fund's annual return. Failure to do so may result in a penalty being imposed.

All these changes affect the superannuation fund's reporting to the ATO in one way or another. In line with these changes Super Concepts has developed a stand alone SMSF audit service to complement your SMSF offering.

Please call 1800 625 644 if you would like to discuss how this SMSF audit service can assist your business.