ATO Audits 300 SMSF Auditors 2018

The ATO will action over 300 audits of registered SMSF Auditors and are already underway with this action. The inherent and underlying factor behind this move from the ATO is to ensure the independence and integrity of all SMSF Approved Auditors auditing processes.

This action was sparked by the ATO as a way to determine whether there was compliance with APES 110 as numerous auditors have been referred to ASIC for assessment of their “Independence” and their Competency in the discharging of their auditing duties.

As many as 117 SMSF Auditors have been deregistered by ASIC in the last 12 months, pending further investigation, and this is a direct result of the ATO’s action to audit SMSF Auditors throughout the Financial Year of 2017/2018.

The ATO has identified characteristics in deregistered SMSF Auditors during their auditing process:

• Auditors performing audits on those that manage the Auditor's personal SMSF.
• A family relationship between the SMSF Auditor and the SMSF they are auditing.
• Partners within firms auditing one another’s portfolio of SMSFs.
• Sole auditor within the firm signing off on staff member audits.
• Lack of compliance within asset valuation in line with the recent legislation changes.
• Absence of evidence and sufficient record-keeping of SMSF auditing.
• Not building safeguards to ensure independence compliance in auditing processes.

The Transition of Retirement Income Streams

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 When an SMSF member decides to transition to a retirement income stream (TRIS), it’s imperative to know the legislation and correct procedures. 

Commencing a TRIS
Steps to commencing a TRIS as stated on the ATO website:

1. Establish the amount of benefits, assets, and liabilities a member has in their SMSF;
2. determine the amount of each preservation class of benefits the member has;
3. if the member commences a TRIS with an amount less than their total super benefits, you can allocate the preservation classes of the member's benefits to the TRIS; and
4. upon commencing to pay a TRIS, you must determine the amount of the tax-free and taxable components of the separate interest.

SMSF Compliance Traps with Bitcoin and other Crypto Currencies

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With bitcoin prices surging by 1,000% in the last 12 months, we are seeing a growing number of SMSF holders investing in the cryptocurrency. It is important that Auditors and Practitioners are aware of the compliance traps associated with bitcoin to ensure they manage their SMSF’s correctly.

Compliance TrapsCompliance Traps

Reg 4.09A Separation of assets
Any investment within the SMSF must show clear identification as being owned by the fund and be distinctly separated from any personal assets the trustee holds.

S66 Acquisition from related party
An unrelated party must be used to purchase bitcoin with cash only, as in specie contributions through bitcoin are not permitted.

Reg 4.09 Investment strategy
The trustee must reflect their decision to purchase bitcoin in their fund investment strategy, due to it being a high-risk investment.It should also be noted that bitcoin is not listed as a collectable due to it not having a physical form. Therefore, it is advised that a separate asset class be created solely for cryptocurrency.

Trust deed
To invest in bitcoin, it is important to check the definition in the fund trust deed and ascertain whether the normal trust deed states outright if it allows or disallows this kind of investment.

How Will Downsizer Contributions Work for SMSFs?

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As of July 1, 2018, downsizer contributions for super funds will come into effect.

The following steps are required for an SMSF member to be eligible: