ASF Audits executive general manager of technical services Shelley Banton said while technology has helped automate the process of analysing large sections of financial and non-financial data, there are still a number of investments requiring continual scrutiny by SMSF practitioners and auditors.
One of the common examples is where a fund purchases a property as a going concern and is GST-free, said Ms Banton.
Problems can start to occur she said where the purchase price of the property is booked in the fund’s financials excluding GST.
“This happens in the blink of an eye, especially where the fund is registered for GST and the SMSF software processes it as a standard transaction. The GST is reversed out of the asset account and recorded as a separate asset called 'GST refundable'.”
“Under these circumstances, fund financials have to be amended with the property re-booked at the full purchase price without the corresponding GST refundable.”
“Where this error isn’t picked up, the SMSF may face issues such as a breach of r8.02B SISR with an incorrect market value of property assets in fund financials,” she said.
It can also trigger an ATO tax audit, she said, that could potentially result in penalties and interest charges.
“When the fund has already claimed and received the GST from the ATO, it’s imperative that the error is found and rectified as soon as possible,” she warned.
“It is important that SMSF auditors remain focused on the fine details and not rely on software to ‘get it right’, as this approach may bring significant problems in the future.”