In September, I will present on this topic at the SMSF Association’s ‘SMSF Audit Day’. More specifically, I will present a topic titled ‘Facing the Regulators: Proven Tips and Traps for SMSF Auditors’ (https://www.smsfassociation.com/smsf-association-audit-day)
One question that I will tackle in that presentation is whether an approved SMSF auditor should perform a title search for each title each year.
However, in this article, I thought I would provide a brief ‘introductory’ answer
Important qualification
The answer that I provide in this article is not necessarily my view of the law. Furthermore, the answer that I provide in this article is not necessarily my view of industry practice.
Rather, the answer that I provide in this article is a brief version of what I suspect will most quickly satisfy the ATO if the ATO reviews/audits an approved SMSF auditor’s files.
ATO view
In August 2023, the ATO publicly stated that (https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/checking-for-charges-over-property-assets):
Self-managed super funds (SMSF) auditors should ensure there are no charges over fund assets as part of completing an annual fund audit.
You should obtain evidence annually that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by reviewing the:
- property title to check for encumbrances on real property
- Personal Property Securities Register to check for other parties registering interests against other SMSF assets.
Compliance cases over the last 12 months, have identified that a number of auditors have not been gathering appropriate audit evidence to confirm assets held by a fund are not subject to charges. Referrals to ASIC have also included auditors who, amongst other issues, have failed to identify or report contraventions of regulation 13.14 of the Superannuation Industry (Supervision) Regulations (SISR).
Regulation 13.14 of the SISR is a reportable contravention when the reporting criteria have been met.
For audits of funds that hold property assets, auditors should obtain and hold appropriate evidence to confirm the fund has complied with regulation 13.14 of the SISR.
The page quoted above was the first time that the ATO has stated publicly ‘obtain evidence annually’ and review ‘property title to check for encumbrances on real property’.
Practical application
Accordingly, in order to most quickly satisfy the ATO if the ATO reviews/audits an approved SMSF auditor’s files, yes, an approved SMSF auditor should (among other things):
- perform a title search for each title each year;
- review those title searches for charges; and
- make appropriate notations and retain on the audit file those notations along with the title searches.
Again, I stress the above is not necessarily my view of the law or industry practice. Indeed, there might at times be alternative ways for an approved SMSF auditor to satisfy him or herself of compliance with reg 13.14. (In the SMSF Association presentation, I will detail one such potential alternative way in detail.)
