BALDWINS • FoodLegal

Australian Lawyers and Consultants

Self-Managed Super Funds Face Tough New Audit Requirements

November 2003

Self-managed superannuation funds are to face tougher audit requirements. The new enforcement policy by the Australian Taxation Office (the regulator of self-managed super funds) will commence from the start of 2004 and require ALL super funds to pass the independence tests laid down by the various professional accounting bodies. The rules are outlined in the ATO’s Superannuation Circular 2003/2, "Self Managed Super Funds - responsibilities of the approved auditor".

Broadly, independence means freedom from any interest incompatible with integrity and objectivity. An auditor must not only be independent, but must also appear to be independent. Independence requires a freedom from bias, personal interest or association and susceptibility to undue influence or pressure (Statement of Auditing Practice AUP 32).

Prior to the new rules, many accountants applied a more relaxed definition of "independence" and considered there was no problem if the accountant did not have day-to-day decision-making responsibilities for the fund. The new audit requirements will no longer permit the same accountant to prepare the tax return and do the audit, and accountants will face the risk of imprisonment and/or substantial fines for contravention.

Worse still, a Bill now before the Federal Parliament, if passed, would force all auditors of all self-managed super funds to report any breaches of the regulations directly to the Tax Office, regardless of seriousness, and this report by the auditor to the ATO would be required prior to notification by the auditor to the trustee of the super fund.

There is little doubt that the ATO is looking to non-complying superannuation funds as a source of revenue because a non-complying superannuation fund is potentially liable for a retrospective tax assessment at 47% on previous tax deductible contributions if a complying fund becomes non-complying. Up until now, the auditor would notify the trustee who could "get its act together" and apply for leniency from the superannuation regulator. The new laws seem to be focused on revenue collection more than prudential regulation of superannuation.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

Return to the Tax Law Archive or Superannuation Law Archive.