The Government’s proposal of a three-year audit cycle for some SMSFs might not end up saving these funds any money.
The Institute of Public Accountants said the three-year audit cycle “may be flawed”, or at best would simply defer costs.
IPA CEO Andrew Conway said the proposal, where SMSFs with a good compliance history would have three years audited at once instead of annually, may be “very well intended but could well be misdirected”.
“There are other ways to reduce the red tape involved in managing SMSFs,” he said.
“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.”
“Does the Government want to put at risk the current record of good compliance?”
“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.”
Conway said that auditors not working with SMSF trustees in the unaudited years could lead to increased contraventions, and not addressing these contraventions in a timely manner can result in “exponentially” growing costs and “systemic risk”.
Only around 2% of SMSFs have an Auditor Contravention Report lodged each year. Conway said the IPA was concerned that this low rate of contraventions may reverse without timely audit oversight, and all for a potential small reduction in costs.
“A loss of integrity in the SMSF sector is simply not worth the risk,” he said.
“We urge the Government and regulators to look at alternative ways to reduce the compliance burden and cost associated with SMSFs.”