Self-managed super funds must comply with Australian superannuation legislation which requires a compliance audit each financial year to avoid a range of penalties imposed by the ATO for failing to meet compliance obligations.
Three common SMSF audit issues consistently arising when reviewing Self-Managed Super Fund’s include:
- Deed Upgrades
The trust deed for a SMSF stipulates all the rules which govern the operation of a SMSF.
As there are constant changes to superannuation laws, we recommend trustees upgrade their deed whenever there are significant changes and at least every 5 years to ensure it is consistent with current legislation, and does not restrict options for members.
- Valuation of Assets
The SIS Act requires that all assets be shown at market value in the annual financial statements. This is so that the super fund value can be readily determined if a member wants to enter or leave the fund.
Valuation is easy for listed securities like shares, but for non-listed assets such as property, artwork and other collectibles, this may pose as a complicated task to determine.
It is recommended by the ATO that all assets held in the superannuation fund are revalued regularly and carried at market value provided that the valuation is based on objective and supportable data. For more stable assets like property or collectibles, it may not be necessary to review values every year, unless there is a significant change to circumstances – for example a wide spread property downturn.
- Assets held in the wrong name
Fund assets must be held in the name of the fund and must be clearly distinguishable from other assets held by the trustee. Where an SMSF has a corporate trustee (that acts solely as trustee for the fund), this trustee name must be displayed for all assets owned by the SMSF. However where a SMSF has a number of individual trustees, it is a common error for the SMSF to display only one individual trustee name rather than showing all individual trustee names, and to not show the name of the super fund. If the super fund name is not included, it’s not possible to determine whether the individual trustees hold the asset on behalf of the fund, or for themselves. This is particularly challenging for property as in WA you can only include trustee names on a title. In this case trustees must hold other evidence such as a declaration of trust to prove ownership.
Author: Jesper Lim