The things you need to know about auditing your SMSF

Self-managed superannuation funds (SMSFs) can help many Australians build their wealth for retirement but one of the responsibilities of running one is ensuring successful financial and compliance checks.

SMSFs are investment tools that are subject to the tax regulations of the Australian Taxation Office (ATO). If you own an SMSF, here are the things you need to know.

What is an SMSF audit and how does it work?

An SMSF audit is a legal requirement set by the ATO to ensure that SMSFs remain compliant to regulatory tax policies.

It is mandatory for SMSFs to undergo an annual audit during tax time, particularly before lodging the funds’ annual tax returns.

The audit must be conducted by an independent auditor accredited and registered under the Australian Securities and Investments Commission (ASIC).

The trustees must be able to appoint an auditor within 45 days before the SMSF’s annual return to the ATO is due.

How often is an SMSF audit required?

SMSF audits are required every year — even if there are no contributions or payments made in a given financial year, an SMSF is still required to undergo an audit.

When filing your SMSF annual returns, you will need some information from an audit report. This means that it is crucial to get your audit done before filing your fund’s returns.

How much does an SMSF audit cost?

According to ATO, the median fee charged by SMSF auditors is $550.

The table below shows the average and median SMSF auditor fees from the financial year 2015-2016 to 2019-2020:

 Source: ATO

What is required when an SMSF undergoes an audit?

You must prepare several documents if you are about to get your SMSF audited. The following are some of the documentary requirements and information you may need to provide your auditor:

Financial reports.

The following documents are needed for the financial audit of the super fund:

• Balance sheet

• Income statements

• Bank statements

• Member statements

• Investment documents such as shares, dividends, contract notes, property documents, and rental statements.

Relevant Documentation

If it will be the first time the auditor will be conducting checks for your fund, you may need to supply copies of the following:

• Trust Deed

• ATO Trustee Declarations

• Investment strategy

• Member applications

• Minutes of the meetings

• Actuarial certificate

As a general rule, SMSF must provide all information requested by the auditor within 14 days.

Final reminders on SMSF audits

Once the audit is done, you will be able to receive an independent auditor’s report. You will be informed of any potential issues and the auditor will work with you to address them. There are some breaches that may still be reported to the ATO even if you have already resolved them. Ensure that you discuss these potential breaches with your auditor.

If you are unable to have your SMSF audit, you will not be able to lodge your tax return, which will incur penalties from the ATO in the form of monetary fines, trustee disqualification, and closure of the fund in worst-case scenarios.

See also: How to do a health check for your SMSF

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