Contravention, integrity risks prompt IPA lobbying for auditors

Previously, the IPA said it is working with the Minister for Revenue and Financial Services Kelly O’Dwyer, as well as calling on the SMSF sector to remain robust, regarding the proposed changes.

The government’s justification that moving SMSF annual audits to a three-year cycle will reduce compliance costs for trustees may be flawed or could be a cost deferral at best, the IPA said.

IPA chief executive Andrew Conway said the proposal of a three-yearly cycle for SMSFs with a history of good record-keeping “may be very well intended but could well be misdirected”.

“Having one audit every three years that covers the three-year period may seem more efficient but may not translate to cost savings. The question needs to be asked if the potential cost savings, if any, are worth the risk of SMSF trustees becoming non-compliant,” Mr Conway said.

“Does the government want to put at risk the current record of good compliance?”

Mr Conway said not working with trustees in the unsupervised (unaudited) years may result in an increase in contraventions if this measure proceeds.

Further, he said not addressing these contraventions on a timely basis can result in the costs growing exponentially, as well as presenting a systemic risk.

“The annual audit cost may be begrudgingly paid by trustees but most trustees would see this as a form of insurance as the penalties imposed by the ATO for contraventions can be significant,” Mr Conway said.

“Without the annual and timely audit oversight, we are concerned that the low rate of contraventions may start to reverse, for the sake of a potential small reduction in costs over time. A loss of integrity in the SMSF sector is simply not worth the risk.

“A well-functioning SMSF sector is a by-product of good regulation. The SMSF auditor plays a vital role in providing the regulator with assurances that SMSF trustees are playing by the rules,” he said.

“There are other ways to reduce the red tape involved in managing SMSFs.”