The latest SMSF news from the regulator is that the ATO will be targeting low-cost SMSF audits and consequently the reality is that trustees could be risking a lot to save a little.
The ATO are working on the principal that low cost/high volume audits mean that the auditor is not examining the records closely enough.
With trustees now personally bearing the cost of ATO penalties, a low-cost SMSF audit today may not be a low-cost ATO SMSF audit tomorrow. The worst case scenario is being deemed non-complying. This has the devastating effect of losing close to 50% of the funds investments to the tax man. With other penalties ranging from $1,700 for simply failing to prepare financial statements, up to $10,200 for more serious breaches. These are all per trustee, which multiplies quickly for a fund with four trustees. Plus the professional fees incurred by having your case represented to the ATO.
All quality SMSF auditors price according to time. Unfortunately, there’s no such thing as a standard fund. So how can it cost the same to audit a fund with a limited recourse loan borrowing as it does for a fund with a single bank account? It can’t! No matter what technology is being used or how much work is being done.
The ATO are using their data mining capabilities in on-line advertising and social media sites for information on low-cost auditors providing easy audit outcomes. They are data matching SMSF auditors with the number of Audit Contraventions they report and their audit fees. They then request the details of the funds on which the auditor signs off.
If these factors trigger an ATO review of the SMSF auditor’s files, that low-cost SMSF audit could end up costing the trustees a lot more. Trustees are bound to compare costs, the reality is that the costs for ensuring the regulation and preparation of the financial statements is correctly done is more transparent in a SMSF. Where as in a public offer fund the costs often go un noticed but are generally much higher.
SMSF MANAGER -OPTIMA PARTNERS