Change on ATO website critical for auditors

Mr Figot said for a number of years the ATO has maintained a page on its website, QC 45566. Although the exact wording has changed over time, the suggestion has always been the auditor should obtain evidence that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by carrying out the following checks:

• Property title search to check for encumbrances on real property;
• The Personal Property Securities Register for other parties registering interests against other SMSF assets.

“The above does not talk about the need to do this annually,” he said.

“More specifically, it does not expressly say that an approved SMSF auditor should conduct title searches for each title annually.

“But in August 2023 the ATO launched a new web page dedicated to just looking at how auditors should check charges (QC 73156).”

The ATO website now states auditors should obtain evidence annually that trustees have not given a charge over in relation to a fund asset by seeking written confirmation from trustees and by reviewing the:

• Property title to check for encumbrances on real property
• Personal Property Securities Register to check for other parties registering interests against other SMSF assets

“Naturally, the ATO’s opinion is not the law. However, the ATO decides whether to refer an approved SMSF auditor to ASIC.," he said.

“Accordingly, the ATO’s opinion is very important, therefore, there is merit in an approved SMSF auditor conducting a title search for each title annually.”

In the past few weeks, the ATO has issued several notices indicating that it is ramping up its compliance program for SMSF auditors, and making more referrals to ASIC.

“And it is something I am doing more of in my practice, advising and representing auditors,” Mr Figot said.

“The ATO has said for some time that auditors need to seek written confirmation from trustees, however, an auditor may say they did check it a number of years ago and are understanding they don’t need to do it every year,” he said.

“But as of August, it seems the ATO is suggesting that auditors now obtain evidence annually.

Mr Figot said the ATO has a compliance program of auditing approved SMSF auditors. If the ATO is satisfied with what it sees, it may close the file. However, if the ATO is not satisfied, it may refer the approved SMSF auditor to ASIC.

“ASIC then has various options open it including disqualification,” Mr Figot said.

“For this, and many additional reasons, approved SMSF auditors should aim to maintain audit files that quickly satisfy any ATO audit.”