Government still mulling over 3-yearly audit cycle
Senator Jane Hume says the government is still in the process of considering the outcomes of the consultation it undertook on introducing a three-yearly audit cycle for certain SMSFs.
In an address to SMSF Association Investor Assistant Expo, Minister for Superannuation, Financial Services and Financial Technology Jane Hume said while the SMSF sector is still a significant and growing portion of the superannuation industry, the complexity and administrative demands of running an SMSF have slowed the growth of the sector.
Ms Hume said the government would look to support SMSFs and reduce costs for SMSFs by implementing the measures it announced as part of the 2018–19 and 2019–20 federal budgets.
“These measures will be especially valuable for SMSFs, which don’t enjoy the economies of scale of larger funds,” she said.
Ms Hume said this includes the measure announced by the government in this year’s budget to allow superannuation fund trustees with interests in both the pension and accumulation phases during an income year to choose their preferred method for calculating exempt current pension income (ECPI).
“Similarly, the government has also announced it will remove the requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase,” she said.
“It is our hope that these changes will make life easier for super fund trustees, and lower their cost of compliance.”
She also referred to the government’s proposal to change the annual audit requirement to a three-yearly audit cycle for certain SMSFs, which was announced in the 2018–19 budget.
“The government has undertaken extensive public consultation on this measure, and the outcomes of the consultation are currently being considered,” she said.
In July last year, Treasury released a consultation paper on the measure, which suggested restricting eligibility for three-yearly audits to SMSFs that have lodged their SMSF annual returns in a timely manner, three years of clear audit reports and have not experienced any key event.
Speaking at a recent Chartered Accountants Australia and New Zealand event, Deloitte Private partner Liz Westover said she would be very surprised if this measure ever got across the line.
“I think the push back from the industry on this three-year audit cycle was so hard and it really didn't achieve anything that the government originally thought that it might in terms of keeping costs lower,” said Ms Westover.
“It was basically asking auditors to do is the same audit but three years in one hit and trying to get information from three years ago is very hard. The likelihood is that it would have increased costs not decreased costs.”
A lot of SMSF professionals intended to continue getting clients to do annual audits anyway, she noted.
“They were putting adding in a lot of ifs and buts which just made it that much more complicated again. So, you could potentially be eligible for the three-year audit cycle but there were all these triggers that would bring you straight back into the annual audit cycle,” she said.
Other SMSF professionals have also been vocal in their criticism for the measure.
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.
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.