Bryce Figot, special counsel for DBA Lawyers, said in a webinar for the Institute of Financial Professionals Australia that the most important page for SMSF auditors on the ATO website is QC 45566.
“This is the page where the ATO sets out its minimum expectations as to what they want to see in audit files and if auditors don’t follow it slavishly, it is to their detriment,” Figot said.
“It provides the minimum expectations of audit checks and evidence and sets out what the ATO expects to see in an SMSF audit if it were to carry out a compliance review or other activity.”
Figot warned the ATO can and does change the information on its pages regularly and one significant change has been implemented on QC 45566 which affects every auditor.
“It used to say in respect of regulation 13.14: ‘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 that they have not (in trustee representation letter)’,” he said.
“It continues: ‘If the auditor has reason to suspect this may be happening, they should consider further checks, such as a property title search to check for encumbrances on real property, or the Personal Property Securities Register for other parties registering interests against other SMSF assets’.”
However, he said, the wording has now changed and states “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.”
“In my experience, auditors should be doing a property title search every year for every fund, and every property because the ATO expectation changed and this is a big change for auditors,” he said.
“It went from relying on the representation letter unless you have reason to believe otherwise, to now having that representation letter and the advice to do a title search every year.”
Figot noted that another example of changes on the ATO website is contained in QC 26343, which deals with valuation evidence.
“QC 26343 used to say you could look at net income yields when valuing property, now it says for commercial properties, you can look at net income yields but that is not sufficient by itself and only appropriate where tenants are unrelated,” he said.
“The takeaway from this is don’t be caught unawares [by these slight changes].”
