Self-managed superannuation funds (SMSFs) may allow Australians to have more direct control over their retirement savings. That said, SMSFs must adhere to strict regulations to ensure investments are handled ethically and responsibly.
SMSF audits exist to check compliance across the sector. Here, we explain the five W’s (and an H!) of SMSF auditing.
If you would like to know more about SMSFs or the audit process, please get in touch.
Why are audits necessary?
It’s important to ensure your SMSF is compliant with super law for a few reasons. Funds that fail to identify and rectify compliance issues are liable for heavy financial penalties from the Australian Taxation Office (ATO). Furthermore, many SMSF rules are designed to protect you and ensure your investments are in line with the fund’s definition. An audit can help you find weak points in your fund’s strategy, protecting you from compliance penalties as well as investment losses.
Who conducts an SMSF audit?
Audits can’t be conducted by just anyone – they must be carried out by trained auditors who are registered with the Australian Securities and Investments Commission (ASIC). Your auditor must also be independent. This means they cannot be associated with you by family or business. You can search for a qualified auditor on ASIC’s professional register.
When is an SMSF audit needed?
Your fund is required to undergo an audit every financial year, even if no contributions or transactions have been made. You must appoint an auditor at least 45 days before your annual SMSF return is due.
With an SMSF advisor and independent auditor on your team, you can tackle compliance fearlessly.
What does an audit involve?
As a trustee, it’s your responsibility to ensure an auditor is appointed for your SMSF. This may be done by yourself or a trusted professional advisor.
Your auditor will need documentation of your accounts and any relevant transactions. If more information than initially given is requested, it must be provided within 14 days. Upon completing the audit, your auditor will present you with a report outlining any compliance issues. They will then work to help you understand the rules and address these problems.
Where can I find compliance information?
There are plenty of rules surrounding SMSFs. These include complex regulations such as:
- The arms-length rule,
- In-house asset caps,
- Super balance and contributions limits,
- Sole purpose test and member eligibility,
- Reporting obligations.
The ATO’s website has a wealth of resources regarding these rules if you’d like to do your own research.
How can I simplify my audit process?
Staying on top of compliance can be difficult when you go it alone. Working with a qualified SMSF adviser ensures all reporting is handled on your behalf and compliance issues can be addressed proactively.
At Invest Blue, we understand SMSF administration is complicated and time-consuming, so we want to make it easier for you. Get in touch today to find out more.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.