Your SMSF must be audited before the Annual Tax Return is lodged. Once the audit is complete, an audit report will be issued to determine whether your SMSF is compliant with all relevant SMSF regulations and legislation. There are 2 types of audit reports – an Unqualified Audit Report and a Qualified Audit Report.
An Unqualified Audit Report (this is the one you want, no audit qualifications to note) will be issued if the auditor concludes that:
- The Financial Reports of your SMSF is represented fairly in all material aspects; and
- Each Trustee of your SMSF has complied in all material aspects with the relevant requirements of regulations.
It is important to note, not all breaches need to be reported to the Taxation Office. The reporting criteria that determines if an ACR is required to be lodged is based on seven tests. When a Qualified Audit Report is issued, an Auditor Contravention Report (also referred to as an ACR) must be lodged with the ATO. The ATO will most likely contact the Trustee to discuss and rectify the compliance breaches as noted in the ACR. The remedial action to be taken by the ATO is dependent on the risks factors of your SMSF, e.g. previous breaches noted and the compliance history of the Fund.
Acting in your Fund’s best interest, we pro-actively work with Trustees to minimise the risk of a qualified audit report. The ways to ensure a compliant SMSF is for Trustees to complete online training, read info on our website and also to review the audit checklist.