Trustees vulnerable to breaches in Federal Government’s proposed three-year audit cycle
The Government’s proposed three-year audit cycle puts trustees at risk of mistakes and potential fines, according to SuperConcepts CEO Natasha Fenech.
“We have deep concerns that trustees might be exposed to breaches through errors made over such a long period as three years.
“That’s a lot of transactions to get right and it’s a lot easier to deal with mistakes when they’re found earlier.
“Mistakes happen, just look at the 2000 SMSF Trustees who made excess transfer balances by June 30.
“It is true that trustees want an easier and cheaper way, and it is politically tempting to consider that auditing every three years helps achieve this. But the proposed policy opens ordinary citizens to greater complexities in their SMSF if things aren’t picked up as early as possible,” says Ms Fenech.
The Federal Government’s proposal states that eligibility for a three-yearly audit be based on self-assessment by SMSF trustees.
“If you’ve never been late with a SAR (SMSF Annual Return) in the past three years, you’re entitled to feel eligible under the current proposal,” said Ms Fenech.
“We have concerns that under the three-year audit proposal trustees will be exposed to potentially higher costs to rectify any issues that are detected in year one or two.
“The added time compounds the costs and effort required to rectify this and that would mitigate any convenience of less frequent audit cycles,” says Ms Fenech.
“We believe that only regular auditing can help mitigate these risks and ensure ongoing compliance,” says Ms Fenech.
Possible key events include:
- the commencement of a superannuation income stream by a member for the first time;
- the death of a member;
- the addition or removal of a member;
- receipt of non-arm’s length income (NALI);
- commencement or maintenance of a limited recourse borrowing arrangement (LRBA);
- acquisition of an asset from a related party;
- investments, loans or leases with a related party; or
- in-species lump sum payments to a member.
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