The Australian Taxation Office is throwing its weight behind a regulatory campaign to enforce compliance with auditor independence rules, saying it will focus its compliance resources on auditors who prepare accounts and tax statements for SMSFs they also audit.
James O’Halloran, the ATO’s deputy commissioner superannuation, says the tax office is scrutinising a group of 92 auditors who act as both tax agent and SMSF auditor for a client.
The ATO’s move follows recent action by the Australian Securities and Investments Commission, which has disqualified a number of SMSF auditors for not operating independently.
ASIC has issued a reminder to SMSF trustees that they must use registered and independent auditors to audit their funds.
ASIC commissioner John Price says: “SMSF auditors play a fundamental role in promoting confidence in the SMSF sector, so it is crucial that they adhere to ethical and professional standards.
O’Halloran says that in the next few weeks the ATO will launch an update of its Super Scheme Smart campaign to highlight existing and emerging arrangements that it considers high risk from a regulatory and tax perspective.
The update will highlight the risks associated with contrived arrangements involving SMSF investment in property development ventures involving related parties. It will also focus on arrangements where an individual deliberately exceeds their non-concessional contributions cap to manipulate taxable and non-taxable components of their super interest upon refund of the excess.
“From time to time we see the emergence of schemes and arrangements targeting SMSF members, particularly those approaching retirement, encouraging them to undertake investments or implement arrangements intended to inappropriately channel monies into their SMSF to take advantage of concessionary or nil tax rates,” O’Halloran says.
He stressed the importance of the role of independent professional service providers in the running of SMSFs.
For example, the ATO will always consider independent professional valuations as the best evidence to support the value attributed to an SMSF’s investment in real property.
“Trustees must satisfy themselves that the values attributed to assets in their fund can be supported by objective data and evidence every year,” O’Halloran says.