With Treasury’s consultation period on the proposed three-year audit measure for SMSFs with good compliance history closing on Friday, the industry has stepped up its lobbying efforts, warning government that the change would be a “ticking time bomb”.
Some of the benefits of the proposed measure noted by Treasury include a “potential reduction in administrative costs and auditor fees”, with the average auditor fee standing at $694 in 2016 and the median at $550.
Speaking to Accountants Daily, BDO partner Shirley Schaefer said that most “plain, vanilla funds” would likely only see a combined savings of $200 over the three-year period, without taking into consideration errors or other factors.
"That assumes you have all of the documentation you actually need without going backwards and forwards, and, two, that there are no issues in it. The concern the industry has is that trustees don't always keep everything they should on a timely basis. We do have trouble getting documentation 12-18 months after the end of the year, let alone if we have to wait three years,” said Ms Schaefer.
“If trustees make a mistake, assuming it is not a deliberate breach but they make a mistake, if the accountant or the administrator hasn't identified that, then the auditor will have to dig further and root out everything behind it, and it could lead to changes to financial statements, changes to tax returns, which will cause more money.
“I have really good clients and even they have lapses of memory or they make mistakes, they underpay their pensions - everyone makes mistakes from time to time.”
Super Sphere director Belinda Aisbett believes trustees will not see any cost savings over time, rendering the proposal unnecessary.
“All auditors get clients in that are late, and have three years of work to be done at one point in time, and for all those clients their fees are higher than had the trustee been organised and arranged their audits each financial year,” said Ms Aisbett.
“Further to this, delayed audits typically have compliance issues that go undetected for a period of time, which increases the audit time. Auditors are also required to lodge an auditor contravention report for contraventions that are repeated, or go uncorrected – so we expect ATO reporting to increase significantly – all this adds time, and therefore costs.”
Further, Ms Schaefer believes that making such a change for the benefit of saving an annual audit is not worth the risk of bringing the integrity of the industry into disrepute.
In the scheme of things, an audit fee for an SMSF is not particularly significant - they range between $400 and $800 per fund - and yet the integrity of the whole SMSF system could suffer for what is a relatively inexpensive annual check,” said Ms Schaefer.
“It doesn't make a lot of sense to remove something that is working well for not very much.”
Likewise, Ms Aisbett believes the costs to the sector are not worth it in the long run.
“The cost to the sector will be huge too – the number of trustees that think they can skip 2 out of 3 audits is alarming – and for these funds there will be significant early access risks – which has consequences for the members personally, consequences for the fund and the sector will take a hit to its integrity,” she added.