SMSF auditor number identifiers found to have been misused

An initiative launched by the ATO over March and April this year involved a mass mail-out to SMSF auditors that listed the funds that had reported each auditor’s SAN (SMSF auditor number) on the fund’s 2017 annual return.

Each auditor was asked to verify that they had indeed conducted an audit of the funds listed in the ATO’s letter.

As at the end of May, about half of the 5,446 auditors contacted in the initial mail-out had replied. Their responses so far indicates that a significant proportion of SMSF annual returns have misrepresented their audit compliance through the misuse of SANs, with 1,445 instances uncovered.

The number of auditors who were able to confirm SAN misuse totalled 420, with the to-be-confirmed involvement of 626 tax agents. So far the ATO says it has not been able to determine if SAN misuse had been deliberate or inadvertent, but has stated that the results of its enquiries suggest that SAN misuse is more common than imagined.

Its fear is that deliberate reporting of an incorrect SAN may be used to conceal a fund from meeting its annual audit requirements, which means that the ATO has no assurance that trustees are complying with income tax and other regulatory obligations and that members retirement benefits may be at risk.

It says that behaviours of serious concern include:

  • some practitioners fraudulently charging clients for audits that have not occurred
  • the preparation of false independent audit reports (IARs) with forged auditor signatures
  • the lodgment of annual returns before finalisation of the annual financial and compliance audit of an SMSF’s operations.

The ATO is currently contacting the tax practitioners identified through the exercise about the misreporting of SANs. It is to ask them to advise whether the fund was actually audited and if so, to provide it with a copy of the audit report and lodge an amended tax return reporting the correct SAN.

It plans a further mail-out in September and October that will give SMSF auditors an opportunity to review the list of funds that reported their SAN on 2018 returns and to take action if required.

Related webinar:
Appropriate audit evidence for market valuations for SMSFs.

With an increased focus on market valuations in SMSFs, what is appropriate and sufficient has become a topical discussion.

5 September 2019
11am – 11.45am
Details here

Statistical state of the SMSF service provider market

The most recent SMSF statistical survey conducted by the ATO (which was for the 2016-17 income year) shows that:

  • In 2016-17, SMSFs used the services of around 5,600 SMSF auditors and 13,600 tax agents.
  • 52% of SMSF auditors performed between five and 50 SMSF audits, while 28% of SMSF auditors performed between 51 and 250 audits.
  • 5% of SMSF auditors conducted more than 250 audits, representing 49% of total SMSF audits in 2016-17.
  • 99% of SMSFs used a tax agent to lodge their 2016-17 SMSF annual return.

SMSF expenses

  • The average total expense ratio of SMSFs in 2016-17 was 1.17% and the average total expenses value was $13,900.
  • The average ‘investment expense’ and ‘administration and operating expense’ ratios in 2016-17 were 0.66% and 0.51% respectively.
  • SMSFs in pension phase incurred higher average total expenses than funds solely in accumulation phase.
  • Generally, the average expense ratio for SMSFs declines as fund size increases.


[], [], []

Post a comment