Key takeaways
- An approved SMSF auditor must audit the fund every year, before the annual return is lodged.
- The audit has two parts: a financial audit and a compliance audit against super law.
- The auditor must be independent and cannot audit a fund they help administer.
- Significant breaches are reported to the ATO through an auditor contravention report.
The annual audit is the cornerstone of SMSF regulation. It is not optional, and it is not a formality. Every fund must be audited each year by an approved SMSF auditor, and that audit has to be completed before the fund lodges its annual return.
What the audit covers
An SMSF audit has two parts:
- Financial audit. The auditor checks that the financial statements are accurate and that the fund's assets exist and are valued at market value.
- Compliance audit. The auditor tests the fund against superannuation law, covering the sole purpose test, separation of assets, in-house asset limits, investment rules, contributions and benefit payments.
Who can audit your fund
The auditor must be registered as an approved SMSF auditor with ASIC and must be independent. Independence is strict: an auditor cannot audit a fund where they or their firm prepared the accounts or have a close relationship with the trustees that compromises objectivity. This is why many funds use a separate, specialist auditor.
What you need to provide
The auditor relies on evidence, so trustees provide the financial statements, bank statements, investment records, contribution and rollover records, minutes, and supporting documents such as property valuations or loan agreements. Good record keeping through the year makes the audit smooth.
If the auditor finds a problem
Where the auditor identifies a breach that meets the reporting tests, they must lodge an auditor contravention report (ACR) with the ATO. Not every issue is reported, and many can be corrected, but trustees should treat audit findings seriously. The ATO decides how to respond based on the nature of the breach and whether it has been rectified.
Frequently asked questions
- Can my accountant also audit my SMSF?
- No, not if they prepared the fund's accounts. Independence rules prevent an auditor from auditing a fund they help administer. That is why a separate approved SMSF auditor is engaged for the audit.
- What happens if my SMSF fails its audit?
- An adverse finding does not automatically mean trouble. Many issues can be corrected, and only breaches meeting set tests are reported to the ATO. The ATO then considers the breach and whether it has been fixed before deciding any response.
- How much does an SMSF audit cost?
- It varies with the fund's complexity, but the audit is a fixed annual cost. Funds with property, borrowings or unusual assets generally cost more to audit than simple funds holding shares and cash.
