SMSFA said in a statement on Friday that the ATO’s position has been consistent for some time.
“We have confirmed with the ATO that the Commissioner has not made any changes to its view which aligns with an SMSF auditor’s obligations as set by the Auditing and Assurance Standards Board,” said SMSF Association head of policy and advocacy, Tracey Scotchbrook.
“The ATO’s recent statements in ‘Checking for charges over property assets’ (QC 73156) does not restrict an auditor applying their professional judgement or providing alternative evidence.”
She stressed that the ATO’s compliance audit guidance on SIS Reg 13.14 states:
The auditor should obtain evidence that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by carrying out the following checks:
- Property title search to check for encumbrances on real property.
- The Personal Property Securities Register for other parties registering interests against other SMSF assets.
The source of confusion for auditors arose from a recent addition to the ATO’s auditing advice page on property assets, which suggests that auditors should now perform an annual title search, creating uncertainty.
Namely, the ATO website now states: You should obtain evidence annually that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by reviewing the:
- property title to check for encumbrances on real property
- Personal Property Securities Register to check for other parties registering interests against other SMSF assets.
But Ms Scotchbrook pointed out that as the number of auditor referrals to ASIC continues to rise, it’s increasingly obvious that there is a misalignment between the ATO’s expectations and the practices of some in the industry.
“It is something we as a sector need to work on to bridge the gap”.
Moreover, she said that this issue also “reinforces the fact that a cursory review of an SMSF won’t meet the ATO’s expectations if the auditor is subject to a compliance review”.
“This is not to say most auditors are not doing the right thing. But it is to highlight that if auditors want to prevent a referral to ASIC, they need to demonstrate that they follow a rigorous process that clearly documents and adequately supports their opinion.”
To help lift some of the confusion, Ms Scotchbrook urged the ATO to publish articles that focus on specific compliance issues ATO officers have identified when reviewing SMSF auditors.
Is this a storm in a teacup. We all should have been doing annual title searches. Nothing to see here.
When SMSFs have property, it is nearly always material. And in many cases it is the largest investment in the fund. So why wouldn’t an auditor get an annual title search.
Again, any argument on the frequency of title searches is really about money and penny pinching trustees and/or their referrers victimising SMSFs auditors.
It’s the cost of a $20 title search vs those referring SMSFs to auditors complaining about any outlays being added to the quoted “one size fits all” audit fee.
It’s actually an example that not all SMSF audits are the same and should never be billed the same for their audit fee.
If you were an accountant and charged all your business clients the same fee, regardless of complexity, you would be out of business pretty quickly.
SMSF audits are no different. The audit fee should fit the fund.
Auditors should do title searches annually on all your SMSF audits and add have the guts to add it to the invoice as an outlay. If someone doesn’t like that, then do a ACR that you were not provided sufficient evidence that the SMSF did not grant a charge, then it will cost them!
Exactly right. As an accounting firm dealing with SMSF compliance, we perform annual title searches ourselves for funds that own property. One, it helps you confirm ownership yourself without having to worry about it getting to audit and finding there’s a problem. And two, in most instances it’s a lot cheaper obtaining them before it gets to audit!
The ATO requirements HAVE changed, as illustrated by the amended QC 73156.
We had a recent ATO review with alternative procedures for property existence. The ATO referred us to ASIC as there was not a recent title search. So forget about your professional judgement. If the ATO does not have this, they refer you to ASIC. Very disappointing state of affairs.