A change to auditing rules for self-managed superannuation funds the government proposed in the 2018-19 Federal Budget could inadvertently lead to an unnecessary rise in compliance issues in the segment, specialist tax planner Max Newnham said.
The government’s proposal to allow funds with a clear auditing record over three consecutive years to be audited only once every three years could lead to a breakdown in the SMSF auditor/administrator relationship, Newnham, a TaxBiz Australia financial planning specialist, reckoned.
If auditors are looking at a fund only every three years, instead of every year, it’s possible the auditor could get more nit-picky about minor compliance issues.
Auditors and SMSF administrators now work closely together to resolve issues before funds become non-compliant.
“If the government wants to make auditing standards for SMSFs better, it should tailor auditing rules to the segment, rather than going down the path of reducing auditing requirements,” Newnham told Professional Planner. “My understanding is that this policy was included as a sweetener for SMSFs as a result of all the changes introduced from July 1, 2017.”
If this policy were passed, it would result in many SMSF auditors going out of business because most of their clients would require audits only once every three years, unless those auditors became excessively focused on reporting minor contraventions so funds never had three consecutive years of clear reports, Newnham explained.
He said it made more sense to create a specific set of auditing roles for SMSFs.
Having a set of audit standards and tests tailored to SMSFs would lower audit fees while enhancing the integrity of the superannuation system, Newnham said.
Max Newnham writes a weekly column on self-managed superannuation fund tax strategies for Professional Planner.