Pension documentation, valuations marked as compliance hotspots

“If accountants and trustees get that right, then they’re likely to also get the transfer balance account reporting (TBAR) correct,” Ms Schaefer.

From a best practice point of view, Ms Schaefer said there should also be clear documentation in place which sets out how payments are to be treated, or documentation which explains that a particular amount of money is a lump sum versus a pension.

“It’s difficult because trustees at the beginning of the year might think that they only want to take the minimum and the rest will be lump sums, but it may not be documented at that time, so it’s very difficult to determine whether they did or didn’t have that thought at the beginning of the year,” she explained.

“So long as there’s some documentation around what payments are, or documentation around how they want it treated at the beginning of each year, or a standing minute that provides instructions, then I think it’s okay.”

Ms Schaefer stressed that it’s not up to the accountant to arbitrarily make these decisions.

“It’s important that you’ve got the paperwork for what has been done,” she said.

Following the two auditor court cases last year, auditors have also been much more meticulous with what they’re looking for with valuations, Ms Schaefer said, particularly for any non-public investments such as private loans, private companies and private trusts.

“It’s not that auditors don’t believe the trustee when they tell us an asset is worth a certain value; it’s that from an audit perspective, we need evidence. It’s not about what the value is but how the trustee arrived at that value,” she clarified.

“That’s the bit that’s often missing when I’m doing audits. They’ve got the valuation and the valuation minute, but there’s nothing to indicate what the trustee has looked at to get to that value. What did they rely on in relation to determining that value?”

She also noted that the ATO has recently updated its valuation guidelines, removing any reference about three-year valuations.

“The strict requirement is that trustees are required to value the assets at market value each and every year. Now, that doesn’t mean that you have to go out and get independent valuations each and every year, but it does mean that the trustees have to turn their mind to it each and every year,” she explained.

“Certainly, that’s where I’ve seen a lot more of the focus in recent times in my audit role. How did the trustees arrive at the value, what did they look at? Just saying, well, that’s what it was last year probably isn’t enough in most cases.”

Ms Schaefer said unless there’s been a significant change in value and the trustee bought the asset on an arm’s length basis from an unrelated party, then there’s probably no need for an external valuation.

“You don’t have to spend hundreds of thousands of dollars determining it, or spend lots of time looking at it. It’s just about the trustees documenting what did they think about, providing copies of searches they did or information they got, just so the auditor can look at it and say, that looks reasonable, I’m able to confirm that, there’s nothing I know that would cause it to be any different,” she said.