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Superannuation Fund Audits
Many Self Managed Superannuation Funds (SMSFs) require some form of audit or review to ensure that they are being administered correctly and that they are compliant. The tax office and Australian Prudential Regulation Authority (APRA) place certain requirements on SMSFs under the SIS Act. In order to avoid penalties SMSFs are regularly audited by approved auditors.
The information below has been compiled to help answer some of your questions about superannuation fund audits
- Annual Audit Requirements
- What records must you keep
- What do you have to submit to the Tax Office or APRA
- Who can be an approved auditor?
- What records does the auditor need?
- The Auditor’s report
- What do you do after the audit?
In order to be considered a complying superannuation fund and receive tax concessions, it must first elect to be a regulated fund and governed by the rules of the Superannuation Industry (Supervision) Act 1993 (the SIS Act). A complying superannuation fund’s income is taxed at a rate of 15%, while a non-complying fund’s income is taxed at 47%.
The Tax Office regulates self managed superannuation funds. The Australian Prudential Regulation Authority (APRA) regulates all other superannuation funds that do not meet the definition of a self managed superannuation fund. See below definitions of a self managed superannuation fund.
The Tax Office and APRA monitor the compliance of superannuation funds under the SIS Act. They do this by requiring that the accounts and statements, and superannuation fund’s compliance with the provisions of the Act, be audited each year by an approved auditor. The audit must be performed within 4 months of the end of the financial year.
Failure to perform the audits in accordance with the SIS Act may lead to significant penalties for the trustees and/or the auditor.
What is a self managed superannuation fund?
A superannuation fund is a self managed fund if:
- It has a trust deed that meets the requirements of the SIS Act;
- It has four or less members;
- Each member of the fund is a trustee;
- No member of the fund is an employee of another member of the fund, unless they are related; and
- No trustee of the fund receives any remuneration for their services as a trustee.
Wherever possible, responsible accounting practices will be adopted by the trustees, such as:
- Joint signatories to signing cheques
- Separating of accounting functions, for example, receipts and payments
- Segregation of duties
Trustees must keep the following records for at least five years:
- Accurate and accessible accounting records that explain the transactions and financial position of the fund
- An annual operating statement and an annual statement of the funds financial position
- Copies of annual returns lodged
Trustees must keep the following records for at least 10 years:
- Minutes of all meetings
- Records of changes of trustees
- Records of changes of directors, if corporate trustees
- Written consents by members to be appointed as trustees
For tax purposes, trustees must keep records of:
- Deductions claimed for administrative and operating expenses of the fund
- Sales/purchases of assets for capital gains tax purposes
- Tax file numbers of members
- Deductions claimed for the provision of death and disability benefits for members
Penalties apply if trustees fail to keep the records listed above for the required period.
Trustees of self-regulated superannuation funds are required to submit the following to the ATO:
- Have your financial records audited and lodge the combined income tax and regulatory return with the Tax Office by the due date.
Those funds regulated by APRA must prepare an APRA Annual Return that includes the following forms (after the audit has taken place):
- Statement of Financial Performance
- Statement of Financial Position
- Selected Disclosure of Investments
- Derivative Financial Instruments
- Exposure Concentrations
- Transactions with Associated Parties
- Membership Profile
- Superannuation Entity Profile
- Trustee Statement
The SIS Act defines an ‘approved auditor’ of a superannuation fund as a member of the Australian Society of Certified Practicing Accountants or a member of the Institute of Chartered Accountants in Australia.
Michael Quinn is an experienced, qualified auditor and member the Australian Institute of Chartered Accountants.
For auditing superannuation funds, it is recommended by the Institute of Chartered Accountants that the Appointed Auditor follow a standard of independence. This means that it is recommended that the firm that prepares the tax return not be the firm that conducts the audit in order to minimise risk of breaches not being identified or reported. If a firm prepares the tax return and performs the audit, the fund will be at increased risk of an ATO audit.
Essentially, the auditor will need all the information that is listed below. It is best if you have this information already prepared, and then meet with the auditor before the auditor starts any work.
The auditor will need:
- The Financial Statements and signed audit report from previous year
For the Financial component of the audit:
- This years signed Financial Statements and Income Tax Return (or tax calculation workpaper).
- The General Ledger
- Bank statements of the year and Bank Reconciliation at 30 June
- Work papers detailing for each asset
- If fund own direct property:
- copy of rates notice showing Lot and Plan number
- Market valuation (e.g. real estate agents or trustee’s valuation)
- Copy of lease agreement
- If fund has investment/s in related unit trust/s we require: Financial Statements and supporting documentation.
- Members statements and work papers for allocations (if allocations are manual)
- Copy of supporting documents for Investment Income. e.g.
- Dividends (Dividend Statements)
- Managed Funds (Annual tax statement)
- Related Unit Trust (Copy of Tax return)
- Property (Rental statement)
- Rollovers (copy of ETP Statements)
- Contributions: Copy of MCS and confirmation of contributions letter detailing member and employer contributions.
- Copy of supporting documents for expenses: e.g.
- Accounting and administration fees
- Insurance (copy of policy doc’s)
- Property (rates notice, R & M, Insur, etc.)
For the compliance component of the audit:
- Trust Deed and amendments and copy of Membership applications and consents of trustees
- List Members and DOB – if they are individual or corporate trustee, include a copy of the latest ASIC annual statement of corporate trustee
- Are any of the members in a employee – employer relationship?
- Copy of ATO Notice of Compliance (or APRA)
- Copy of signed Minutes for year
- If fund paying pension or benefits have been paid during year
- Copy of pension request from member to the trustee and acceptance by trustee.
- Work papers calculating benefits
- Copy of PAYG Summary and/or ETP Statement/s
- Copy of BAS/IAS showing tax paid.
- Copy of actuarial certificate
- Copy of RBL reporting (including RBL reporting done to establish pension)
The Auditor must provide the trustees with a report on the audit in an ‘approved form’. The Tax Office and APRA have worked together to develop an approved audit report form with a view to ensuring consistency with current auditing standards and formats.
The report is separated into 3 sections:
1. Part A of the audit report states the scope of the audit and expresses an opinion on the financial statements.
2. Part B of the audit report sets out the scope of the compliance audit and lists the matters for which an auditor is required to undertake testing with respect to a superannuation entity’s compliance with relevant legislation.
3. Part C of the audit report relates to a new requirement for the audit of certain APRA returns, effective for reporting periods beginning on or after 1 July 2003.
The trustee must lodge the audit report with the Tax Office or APRA.
The Quinn Group has a specialist auditing division with the experience and qualifications required to conduct and issue such Independent Audit Reports and can assist you preparing for your reporting obligations.
Self-Managed Superannuation Funds
All self managed superannuation funds must lodge annual income tax and superannuation regulatory information with the Tax Office using the Fund income tax and regulatory return (NAT 0658) for the relevant year.
The lodgment and payment date for all self managed superannuation funds that prepare their own income tax and regulatory return is 31 October each year.
You must not lodge the income tax and regulatory return until after the audit of the fund has been finalised, as information from the audit report is required to complete the regulatory return.
APRA Regulated Superannuation Funds
The APRA Annual Return is required to be lodged with APRA within 4 months after the end of the financial year of the superannuation entity together with the Independent Audit Report from the auditor of the superannuation entity covering those forms that are noted as subject to audit.
Our dedicated team can assist you with all your auditing needs. Complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.
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The Quinn Group operates Quinn Consultants, Quinn Lawyers, Quinn Financial Planning and Quinn Financial Solutions. The Quinn Group provides related information in regard to legal, accounting and financial planning issues. Liability limited by a scheme approved under Professional Standards Legislation* *other than for the acts or omissions of financial services licensees.