“That was just a driver, or a red flag, for the ATO to think, ‘hang on a minute. Are these people actually really revaluing their assets to market or not?’ There were 1,000 auditors involved and 16,000 SMSFs. The ATO contacted the auditors, and were actually focusing on what auditors were doing, rather than focusing on the trustees.”

Formica continued that at the time, the ATO did let trustees know that the ATO was concerned about their compliance from the perspective of things such as paying the correct minimum pension.

“The ATO went back and reviewed the subsequent annual returns for those self-managed superannuation funds. Of those 16,000 funds, the next time they lodged an annual return, the ATO reviewed them and identified that 80 per cent of those particular funds had, in fact, updated their property valuations in the next return, but only 48 per cent had updated their unlisted trust valuations,” she said.

“The ATO then commenced a review of the auditors where those valuations had not been updated and an auditor contravention report had not been lodged. It then asked auditors what evidence they used to verify the market value of that asset, or verify what the market value of that asset was, and what evidence they asked for from the trustees. And in all of the finalised cases to date, none of those auditors had obtained sufficient evidence to satisfy the ATO that they had done the right thing.”

She continued that the ATO subsequently found that those particular auditors were still using incorrect and outdated practices and were still only obtaining valuations every three years.

“They were not seeking, for example, objective data to substantiate the asset valuation for assets within an unlisted unit trust. They weren’t looking through the trust and working out what those assets were then worth,” Formica said.

“I’m sure most auditors are doing the right thing and not falling into this category, but if you’re an accountant and have SMSFs that are being audited by someone else, you may find that they are now stepping up the game yet again in relation to what they’re asking for in terms of valuation of assets.

“If you are getting requests for further information, more regular information, it is all as a consequence of the action that the ATO is taking to try and stamp out the bad behaviour of auditors for not seeking enough evidence to justify valuations of assets.”