Top 10 tips for a smooth SMSF audit process
There are some crucial tips to take on board to ensure SMSF audits get finalised in a timely and fuss-free manner, without unnecessary and costly delays.
The SMSF audit busy season is upon us. And there’s nothing more frustrating than supplying your information to your SMSF auditor, only to have the audit delayed because you missed a couple of things. Or because trustees didn’t sign or date documents correctly.
Don’t worry, you’re not alone. Very few SMSF audits get finalised without additional requests by the auditor for missing information. And of course chasing up documents adds precious time to the audit, for both auditor and accountant, which can’t usually be recouped.
Some SMSF auditors try to make things easier by providing a checklist of the documents they need before the audit. Despite this, there always seem to be a few common ones that aren’t supplied in the first instance (most likely in the hope no-one will ask for them!).
It’s even an issue with online SMSF auditing. SMSF accounting software/platform providers don’t usually provide free storage on their cloud. And a large amount of compliance documents – such as the fund’s trust deed – still need to be accessed and reviewed by an SMSF auditor during the audit.
The good news is that with a bit of methodical preparation you can avoid a lot of this. So here’s our SMSF audit checklist to help get your SMSF audits finalised faster.
1. ATO trustee declarations. Get your admin team to check the date of the trust deed, and make sure the trustees have signed it within 21 days of the fund being established.
2. Confirmation of contributions. If more than one member receives material contributions, this document confirms which member received what contribution(s). It can be either a minute or a signed contributions report.
3. Expired lease agreements. If the lessee has the option to renew the lease agreement, you need to provide a minute/letter stating that the option has been taken up. If there’s no option to renew, a new lease agreement must be provided.
4. Trustee representation letter. Make sure that this has been signed and recently dated correctly by all trustees.
5. Property rental valuation for related parties. Make sure that a rental valuation is included in the property valuation report, confirming that the rent received from the related party is at arm’s length.
6. Property insurance. If the property is insured only under the trustee/s names, make sure the policy includes the fund as an interested party. Security of fund assets is extremely important, especially in a claim where the corporate trustee acts in other capacities.
7. Work test declaration. If the member is over 65 and makes contributions, a work test declaration must be supplied. (Google ‘work test declaration’ for a template.) This requirement will hopefully change or disappear completely once the retirement age increases.
8. Derivatives risk statement. If any of the trustees play in the derivatives market, a derivatives risk statement must be supplied, signed by them. This is a separate document that analyses the risks and controls of using derivatives within the fund’s investment strategy.
9. Previous year’s reports. You need to provide your new SMSF auditor with the signed financials, audit report and management letter for the previous year. (And yes, we know this isn’t always easy!)
10. Related party property information. Whether the property is held by a related party or directly by the fund, the checks and verifications are the same. You need to provide related party property information in line with the SMSF audit checklist.
When you’re facing the ATO’s looming SMSF deadlines, it’s easy to lose sight of attending to the finer details. But in the long run it’s a lot simpler to take the time to get it right the first time. To quote Steve Jobs:
‘We had a fundamental belief that doing it right the first time was going to be easier and cheaper than having to go back and fix it. And I cannot say strongly enough that the repercussions of that attitude are staggering. I’ve seen them again and again throughout my business life.’
Shelley Banton, director, Super Auditors