Peter Johnson, director of Advisers Digest, said amending a retrospective tax return will more than likely alert the ATO, resulting in the financial professional – whether it is an accountant or auditor – being flagged for an audit review.
Johnson said he was recently asked about the length of time allowable for an SMSF to lodge an amended return in regard to an adjusted property value from 2017 to 2024.
In this instance, an appraisal had been submitted which was retrospective and completed by a certified valuer based on comparable sales. The appraised value of the property was $1.6 million, however, a rates valuation was found that had a valuation of $2.18 million.
“The question was whether a part qualification could be made considering it is hard to look up comparable sales values,” Johnson said.
“[It seems in this case] the accountant didn’t do a transfer balance account report on 1 July 2017 and has probably just realised that they’ve got a bit of a problem. Many years down the track, they were probably doing their own audits and now they’ve got clients with balances that were over and yet claimed 100 per cent pension phase going forward.”
It was often new auditors who are working to qualify aspects of a fund that find errors from previous years and in this case, the financial professional has been asked to do an audit on an account from seven years ago to amend tax returns.
“They have gone to get a valuation back to 2017 and the auditor is just doing what they are meant to do – be sceptical. They have two different valuations – one for $1.6 million and a rates notice that has a valuation of $2.18 million,” he said.
“Of course, the valuer is saying in 2024 that the property was worth $1.6 million eight years ago and there will be no sale that could cause them to get in trouble, but there are comparable sales and an alternative valuation. So should they do a part qualification because they can’t confirm the value of the property? Yes, they should because they can’t confirm which valuation is correct.”
Johnson continued that if the valuation of the property was $2.18 million when the accountant or auditor originally did the accounts, they are required by law to value all assets at market value.
In this instance, with variations in valuation, Johnson said the ATO is more than likely going to review the fund and the original auditor to see what evidence there is to support the valuation at that time.
“However, you cannot now amend [tax returns] that far back. You’re going to have to object, although what will probably happen is that the accounts can be amended. You may not be able to amend the return, but you’re amending the accounts and you’re lodging a TBAR, because they clearly haven’t done a TBAR yet.”
He added that from an auditor’s point of view, if there was no tax return for the fund, there was probably no tax error.
“You’re required to audit the tax payable. Is it correct in the accounts? If it’s correct, well, there’s nothing else to check. If there is an error in the members’ balances each year, then you’d have to go back as far as you can. The accountant can certainly object and try to amend the previous returns, but the tax office may say no. It’s not something you should be making a habit of. Get it right from the start.”
