Three-year audits’ chances slim as ‘small window’ remains
With the government holding off on introducing the bill for the three-year audit cycle until the March quarter and an election not far off, their chances of legislating the measure are looking slim, according to a technical expert.
SuperConcepts general manager of technical services and education Peter Burgess said given the pushback on the three-year audit measure for certain SMSFs, there is a big question mark over whether it will happen.
The measure to change the annual audit requirement to three years for SMSFs with a good compliance history was first announced in the budget this year and largely took the SMSF industry by surprise.
In July, Treasury released a consultation paper on the measure with details on the eligibility criteria and transitional arrangements.
“The consultation phase has now finished. What we do know is that Treasury has briefed the government on the outcomes of that consultation, and the government is still considering their position,” Mr Burgess told delegates at the SMSF Summit in Adelaide.
“I think what’s interesting here is that Treasury have already stated that they intend to have draft legislation out before the end of the year. There’s been no suggestion that the government is going to change their mind on this.”
Treasury have also stated that they intend to introduce the bill to give effect to this measure in the March quarter, said Mr Burgess.
“Now, that’s interesting because we’re going to have an election in the first six months of next year. As soon as they call the election, any legislation that has not been passed lapses. And then, if we have a new government, it will be up to the new Labor government whether they want to reintroduce this bill if they want to do that,” he explained.
Mr Burgess said while it’s hard to say for sure, he suspects a Labor government will not be inclined to introduce this particular change.
“[So] the government will only have a small window of opportunity in the March quarter to get this through, assuming an election hasn’t already been called by then, because as soon as they call an election, anything that hasn’t passed both houses of Parliament lapses,” he said.
The three-year audit measure and its proposed framework have received criticism both from SMSF auditors and practitioners in the SMSF space more generally.
Belinda Aisbett from Super Sphere said that superannuation annual returns were insufficient for assessing eligibility for three-year audits, given that they are lodged directly by the trustee of tax agent and are not reviewed by the auditor.
Concerns have also been raised about the fact the three-year audit cycle may exacerbate the amount a client has to fork out if they face compliance issues.
Others fear that the proposal could also see increased activity by unscrupulous advisers and promoters targeting SMSFs with early release schemes.
“We have seen many examples of trustees facing a personal or business crisis who all of a sudden borrow large amounts of monies from an SMSF bank account,” TriSuper Auditors director Joel Curry previously told SMSF Adviser.
“Under the current audit cycle, this will likely be picked up within 12 to 18 months. Under the proposed measure this could blow out to 36 months or more. To us, this is unacceptable.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.