You’d have to say that two years off for good behaviour would work especially well when it comes to having your SMSF audited. All you’ll need is a clean bill of health and it’s yours.
The announcement in this year’s Federal Budget was that from 1 July 2019, SMSFs ‘with a history of good record-keeping and compliance’ for three consecutive years can move from an annual to three-yearly audit. What this means is yet to be worked out, but the Government, via the Treasury, will consult with ‘interested stakeholders’. This usually includes the SMSF and audit industry, but it would be good to include those who are trustees and members of SMSFs.
The reason for the change is that part of the aim is to reduce red tape for SMSF trustees and reduce unnecessary costs associated with running the fund. How this is achieved is that ‘the proof will be in the eating of the pudding’ and whether there will be a smooth transition to the three-yearly audit for those SMSFs that have done the right thing. One thing’s for sure, there will be no blanket exemption from the annual audit. You would expect that funds need to have three clear audit certificates in a row and regulatory returns lodged on time. Other criteria may need to be met depending on the SMSF.
It’s important with the Budget to read between the lines and consider what is meant by good record-keeping and compliance. Maybe those funds that use the shoebox method of accounting will miss out. This includes those funds that turn up on the accountant’s doorstep at the last minute with the expectation that it’s all fine and the fund’s compliance and income tax returns will go like a dream.
Other funds that are relatively simple, have easy to understand investments, member positions and do their administration on a day-to-day basis are probably at the other end of the spectrum and are likely to qualify for the three-yearly audit concession.
How the three-yearly audit will operate is yet to be worked out as consultation on how it will be implemented is still up in the air. It’s not yet clear whether the three-yearly audit will be an audit of the fund for one of the three years of the cycle, or for each of the financial years covered by the cycle. Also, there are no details on the circumstances in which a fund would be required to return to an annual audit.
But watch this space to see how it will all work and whether it will reduce red tape and costs associated with the operation of an SMSF.
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