Speaking to SMSF Adviser, director of SuperAuditors Shelley Banton said withdrawals and deposits in error are a consistent SMSF auditing “hotspot.”
“How they’re treated will depend on the factors surrounding those transactions, such as materiality, the length of time before the transaction was rectified, what the rules of the fund say etc. There can be various outcomes depending on those sort of factors,” Ms Banton said.
She also noted investment strategies supplied to auditors commonly cause “unnecessary delays”.
For example, a fund’s asset allocation often does not match what the SMSF’s investment strategy outlines.
“We then have to go back and say, ‘Why have you deviated from the investment strategy?’ It’s not so much a mistake, but those sort of things take time.”
Also, quite often, a fund’s income tax details haven’t been correctly filled out.
“There might be incorrect classification of items in the financials, there might be some investments that should be written off when they haven’t been, when they’re declared worthless,” Ms Banton said.
She stressed the importance of attention to detail, even in cases where documents are being supplied by institutions.
“There can be errors on both sides of the fence. People can fill out application forms incorrectly, but also the receiving institution can process things incorrectly as well,” she said.
Also speaking to SMSF Adviser, director of Access Super Audit Vivian Bai pointed to seemingly “obvious” potential breaches which continue to surface.
For example, SMSF trustees should be contentious about getting back to their auditor on time, Ms Bai said.
“Trustees must ensure that requested relevant documents are given to the auditor within 14 days of the request being made. S.35C(2) is one of the regulatory requirements which includes a statutory time period,” Ms Bai said.
“If the contravention is a breach of a statutory time period by more than 14 days, then the contravention must be reported to the ATO. In other words, it is a reportable breach if it takes a trustee more than 28 days to provide documents requested by the auditor,” she said.
Ms Bai also noted that, despite the extensive guidance, there remains a mixed understanding of in-house asset rules and the rules relating to provision of financial assistance to members and relatives.
“An SMSF trustee must not give financial assistance using the resources of the fund to a member or a relative of a member of the fund. There could be some confusion and mixed understanding regarding the application of in-house assets rules (s.82-84) and financial assistance rules,” Ms Bai said.
“An in-house asset could be a loan to a related party of the fund. And when in-house asset is within 5 per cent of the market value of the assets of the fund, there will be no contravention of the in-house asset restrictions. However, complying with in-house asset rules does not mean section 65 is not breached.
“When the in-house asset loan is used to provide financial assistance to a member or a relative of a member of the fund, section 65 is breached. There is no allowable limit under section 65 of SISA. To rectify this contravention the loan must be repaid in full to the super fund.”