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SMSF compliance breaches rising, says lawyer
The number of SMSF compliance breaches is increasing, according to commercial law firm Gadens Lawyers, with issues stemming from poor advice and from members lacking experience.
Kathleen Conroy, partner at Gadens, told SMSF Adviser that in the past 12 months she has seen an increase in breaches related to accessing funds, including incidences in which members of an SMSF are unaware of the implications of withdrawals.
Ms Conroy also said she has seen an increased incidence of incorrect borrowing structures related to limited recourse borrowing, adding that many SMSFs are being opened for the purpose of borrowing.
“The thing with a breach is that it tends to multiply; [when] you do something else to try and fix it, to get around it, you’ve committed another breach,” she said.
Ms Conroy added that the Australian Taxation Office has indicated its compliance team has grown over the past 18 months, which could further suggest a spike in compliance breaches.
Reasons for the increase include advice being offered by practitioners who “aren’t properly skilled in the area”, including lawyers, accountants and financial advisers, she said.
“I see [bad advice] all the time... you’re never excused from it. If you’re the trustee, it’s still your problem.”
No one has yet given me 3 sensible reasons why auditing of SMSf's is really necessary.
Finding out the bank a/c went into Overdraft for 3 days is not quite in the same catetory as ripping off investors with scam investments & then given the culprit a 3 year suspension (IMO)0- As a registered SMSF auditor, I also believe the number of qualified audits and reportable contraventions will rise in the short term, but do believe the changes will lead to long-term improvements. It is also now important that trustees are made aware of the changes to the penalties that they can incur for these "errors".0
- This is another reason why accountants shouldn't be setting up a SMSF unless they are a SMSF Specialist Advisor (like Robert) - many accountants do it well, but more and more clients are cutting out ANY type of advice (accountant / planner) and getting their SMSF journey started on the wrong foot.
I wonder how many unreported contraventions are sitting behind Chinese Walls in a typical accounting firm? Now we have ASIC auditor registration, the next step is have the professional bodies sharpen their teeth and force their members to comply with the professional standards when it comes to independence. A strongly worded recommendation letter following a review is not good enough.
If auditor independence is not made a priority of the SMSF industry we will still have industry funds + other anti SMSF parties taking pot shots.
With 500,000 SMSFs and $500 billion in assets without any regulated independent audit requirements....something needs to change.0 - This does not surprise me. If you go around scaring auditors about big brother then everyone is going to become extremely conservative and lodge contravention reports. Also if you have very complex and precise rules then there is more scope for breaches. Humans have not been designed by nature to handle this amount of minute detail. Our brains are not big enough.
Thus you just have to live with this or rewrite the ruls.0 - As an SMSF Specialist Adviser, I see this all the time and it is mostly stemming from accountants who are keen to set up the fund get the fees then tell the new trustee nothing and provide zero training. It's been my experience that accountants will get their "Friendly" auditor to "Fix" things so all looks good.0
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