Reducing the risk of compliance breaches
Promoted by Evolv Super
As any accountant with SMSF clients knows, the laws around compliance are complex, and it can be easy for trustees to inadvertently breach the rules. That’s where the relationship between an accounting firm and its SMSF auditor can make a valuable difference.
With the due date for SMSF audit independence fast approaching, there are good reasons for accounting and advisory firms to select an audit specialist with true depth of experience. The task of preparing SMSF financial statements is not always clear cut, and using an SMSF auditor such as Evolv, can bring clarity to compliance matters and help reduce the risk of reportable compliance breaches.
Risk of breaches varies between trustees
The possibility of a breach occurring often varies in line with each SMSF trustee’s risk appetite and approach to managing this, according to Daria Galstyan CA, Associate Director – Audit at Evolv.
“Some trustees conduct the affairs of their SMSF without too much thought to compliance,” she notes. “They often transact within the SMSF without consulting with their accountant to provide guidance on any potential issues.”
Galstyan says other trustees can be highly cautious, sometimes to the point of always running an idea past their accountant before taking action.
The third group of trustees are those who Galstyan says can be careful, but don’t necessarily contact their accountant before submitting their fund records.
Of course, SMSF trustees are a highly diverse group, and accountants may find their SMSF trustee clients exhibit behaviours across all these variations. The common thread is that SMSF accountants can face considerable responsibility to alert trustees to potential compliance breaches including the rectification. And the sooner they are identified and rectified the better. As Galstyan notes, “The Australian Taxation Office (ATO) likes to see prompt action being taken.”
Grey areas to be aware of
While many potential breaches of SMSF compliance requirements can be clear cut, some transactions are more of a grey area, and potentially harder to recognise as a breach. This is where partnering with Evolv offers a distinct advantage. As a SMSF audit specialist, Evolv’s audit teams have considerable experience in the SMSF space.
“At present, we are seeing some particular trends emerging,” notes Galstyan. “One such trend involves SMSFs investing in retail shops topped by a residential apartment. Questions can arise around whether this represents commercial property or residential property and is often accompanied by queries on the rules around leasing the residential component to related parties.”
A wealth of resources to draw on
Galstyan explains that more recently Evolv has seen a number of SMSFs invest in limited liability partnerships – usually linked to overseas property investments. This can be a particularly challenging area, and one where Evolv’s SMSF audit specialisation can deliver valuable clarity.
“All the leaders within Evolv have significant industry experience,” says Galstyan. “Not only have we witnessed ongoing legislative changes, we have an established technical SMSF audit team, and an established SMSF audit specialist network that supports identification of an appropriate solution to various problems.
“On occasion we may need to conduct further research to obtain the appropriate solution, however Evolv also has access to specialist SMSF lawyers, who we can obtain advice from. And of course, where appropriate Evolv will approach the ATO to understand its position on a compliance matter.”
This range of options and experience means Evolv has the capabilities to help reduce the risk of compliance breaches, and provide better outcomes for its accounting and advisory firm clients.