The Institute of Public Accountants believes the government’s intention to reduce red tape for SMSF trustees who have a history of three consecutive years of clean audit reports are well intended but could be “misdirected”.
“A well-functioning SMSF sector is a by-product of good regulation. The SMSF auditor plays a vital role in providing the regulator with assurances that SMSF trustees are playing by the rules,” said IPA chief executive Andrew Conway.
“Not working with trustees in the unsupervised years may result in an increase in contraventions if this measure proceeds. Not addressing contraventions on a timely basis can result in the costs growing exponentially; as well as presenting a systemic risk.
“Without the annual and timely audit oversight, we are concerned that the low rate of contraventions may start to reverse, for the sake of a potential small reduction in costs over time. A loss of integrity in the SMSF sector is simply not worth the risk.”
Further, Mr Conway believes the annual audit costs paid by trustees could be seen as a form of insurance against the significant penalties imposed by the ATO for contraventions.
“According to the latest ATO statistics, the percentage of the SMSF population with auditor contravention reports (ACRs) is approximately 2 per cent of all SMSFs each year.
“Having one audit every three years that covers the three-year period may seem more efficient but may not translate to cost savings. The question needs to be asked if the potential cost savings, if any, are worth the risk of SMSF trustees becoming non-compliant.”
CPA Australia has also spoken out against the proposed measure, believing that it would unfairly target SMSF auditors.
Last month, Super Sphere director Belinda Aisbett announced the establishment of the SMSF Auditors Lobby Group, aimed at opposing the proposed measure and suggesting alternatives to reduce costs for the industry.
One of the alternatives it suggested was removing the need for certain minor contraventions to be reported to the ATO, which would reduce audit time and ATO resources.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.