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Case law points to ‘growing importance’ of SMSF document chain

Another thing SMSF Trustees need to be aware of.

         

 

A raft of recent court cases has drawn greater attention to the importance of ensuring each of the documents in an SMSF’s document chain links up correctly, says an industry consultant.

Speaking in a recent webinar, Smarter SMSF chief executive Aaron Dunn said that, each and every year, there is an ever-increasing flow of case law around things such as the payment of death benefits which has highlighted the importance of getting the fund documents together.

While historically the focus has been on whether binding death benefit nomination (BDBN) is valid or invalid, or binding or non-binding, more recent cases studies have started to focus more on the SMSF documents in the chain.

“They’re looking at things like the deed update, the changes to trustees and the pension documents,” Mr Dunn explained.

“The courts are making it very clear that if you don’t have that chain linked and linked correctly, you are going to expose the current set of information as potentially being null and void, and therefore when the court ultimately makes its decision, it may go back to old deeds or whatever that would be referred to as the operative deed.”

Mr Dunn said the courts are not only looking at the update in respect of the trust deed, but may also look at changes that would be made to trustees and therefore who had the right to potentially make those decisions if the appointment of an individual did not occur properly as well.

Last year saw litigation cases such as Cam & Bear Pty Ltd v McGoldrick, said Mr Dunn, which were taken against SMSF professionals in respect of the recovery of losses where the investments went into bankruptcy and liquidation.

This case means that the SMSF sector is becoming more litigious and that there are significant implications for auditors when they review documents for certain investments.

The Re Narumon case was one of the biggest cases about SMSF documents in the past year, and provided a lot of clarity to the sector.

“It provided some really important clarity from the courts in dealing with whether the documents were effective or not and also whether the trust deed updates and variations that were done throughout the period were valid,” he said.

“It also looked at whether the reversionary pension was on foot or not, because we had a set of circumstances whereby John Giles, the trustee, couldn’t find the pension documents, so they were lost, so therefore the question of whether the pension was on foot or not had to be determined by the courts.”

The case also looked at whether the binding death benefit nominations were in essence defective.

“They were only partially defective, but again, for the first time, we needed to know whether the nomination was void in full or whether the part that could not be paid to a non-tax dependent and non-SIS dependent would mean that the whole BDBN was void or not,” Mr Dunn explained.

 

Miranda Brownlee
30 January 2019
smsfadviser.com

 

Common BDBN ‘pitfalls’ flagged in wake of ASIC action

An industry law firm has identified some of the common traps with BDBNs that can land advisers and their clients in trouble.  One example being a recent case of incorrect witnessing of binding nominations.

       

 

DBA Lawyers director Daniel Butler said that while binding death benefit nominations (BDBNs) can be a powerful and important tool for a member’s succession planning, they are still a relatively new legal instrument, with the law still continuing to develop and evolve over time.

“Cases such as Munro v Munro [2015] QSC 61 and Wooster v Morris [2013] VSC 594 show that effecting a valid BDBN is no simple task,” Mr Butler warned.

“More specifically, as BDBNs are a creature of the particular deed, the process of effecting a valid BDBN depends on a number of interrelated factors.”

SMSF deeds that include BDBN provisions from the SISA and SISR through wide deeming provisions of regulatory compliance are one of the key problem areas, Mr Butler warned.

“One important lesson to take away from Donovan v Donovan is that the presence of a broad deeming clause can have far-reaching consequences such as including the three-year limitation,” he explained.

“The ATO in SMSFD 2008/3 considers that s 59(1A) of the SISA and reg 6.17A of the SISR have no application to SMSFs, subject to the terms of the SMSF deed. Accordingly, an appropriately drafted SMSF deed should expressly exclude these provisions.”

SMSF professionals and trustees should also look out for SMSF deeds that rely on a three-year BDBN or contain sloppy wording, he cautioned.

SMSFs that contain poor wording such as “the BDBN is only binding if it’s to the trustee’s satisfaction” can be easily challenged, he said.

“This type of wording can easily give rise to argument if, say, the trustee is the second spouse who decides to reject the BDBN when their spouse dies,” he explained.

It is also important that the chain of previous SMSF deeds, not just the current one, is reviewed, as this can affect whether the BDBN is actually valid.

“The most recent deed must have been varied in accordance with the prior variation power, the relevant consent of each party to effect a variation must be obtained, and relevant notifications under the deed made and any other appropriate legal formalities complied with,” he explained.

“Also, all or some deeds may have required stamping in accordance with the relevant state/territory stamp duty legislation. All these formalities must have been complied with in the document trail, or the fund’s latest deed may not be valid and effective.”

Imprecise wording in a BDBN can also give rise to a number of legal hurdles, such as in the case of Munro v Munro, which used the wording the “trustee of his deceased estate”.

“It is interesting to also note that Mr Munro, who practised as a solicitor during his working life, did not pick up on the numerous legal issues in the documents provided by his accountant and financial planner,” Mr Butler said.

Recent cases such as the Cantor decision and Perry v Nicholson [2017] QSC 163 highlight the problem of how notification and service requirements in relation to BDBNs may give rise to legal challenge.

In the Cantor decision, the trustee of the Cantor Management Superannuation Fund contended on appeal that a BDBN executed by a fund member in 2012 was ineffective because it had not been given to the corporate trustee of the fund in its capacity as trustee in accordance with the terms of the SMSF deed, the director said.

“The court examined the governing rules of the fund and accepted the proposition that the governing rules did indeed require the BDBN in question to be given to the trustee to be effective. However, the court held that this requirement was satisfied in this case by the member leaving the BDBN document at the registered office of the trustee company pursuant to general law standards of service and the specific statutory framework for serving companies set out in s 109X(1)(a) of the Corporations Act 2001 (Cth).”

In Perry v Nicholson, a requirement in the SMSF deed that BDBNs must be given to the trustee was the likely motivation behind the daughter of the deceased member, Ms Perry, bringing litigation contesting the validity of a 2015 change of trustee.

“Ms Perry submitted that, notwithstanding documentation that purported to change the trustee of the fund in 2015, she was still a trustee of the fund and had not been validly removed,” he said.

“Accordingly, Ms Perry submitted that the relevant BDBN purporting to distribute all of the member’s death benefits in the fund to the deceased’s de facto spouse, Ms Nicholson, was invalid. Presumably, this was on the basis that the BDBN had not been provided to the ‘true trustee’ of the SMSF.”

Although the change of trustee was ultimately held to be valid in Perry v Nicholson, the case illustrates that service and notification requirements can provide further ammunition for an aggrieved beneficiary to scrutinise a fund’s document trail, as an invalid change of trustee may provide an avenue to challenge a purported BDBN where these requirements exist.

“The notification or service requirements for BDBNs are generally inappropriate as they give rise to too many issues and prevent members from making effective private BDBNs,” he advised.

Mr Butler cautioned that getting a BDBN right is no easy task and many who mistakenly believe their BDBN is secure will have that complacency exposed after their death when their BDBN is rendered invalid.

Advisers, he said, need to give serious consideration to managing BDBNs as part of each client’s integrated estate and succession planning.

“Our recommendation is for advisers to institute a ‘best practice’ approach to ensure that they only use quality documents and procedures. Ideally, this should be done with the engagement of experienced SMSF lawyers. Otherwise, advisers may be open to significant legal liability when disputes arise,” he warned.

ASIC has increasingly been ramping up its focus on the conduct of advisers in relation to binding nominations in the past 12 months.

A financial adviser was permanently banned after an ASIC investigation found they had dishonestly backdated advice documents and incorrectly witnessed binding nomination of beneficiary forms.

ASIC stated that they have engaged in “misleading and deceptive conduct” by allowing the “incorrectly witnessed binding nomination forms to be submitted to insurers on behalf of two of his clients”.

In January last year, ASIC said that it has discovered widespread examples of improper and unethical practices in relation to death benefit nomination forms.

One of the common practices that concerned the regulator was financial advisers witnessing or having staff members witness client signatures on binding death nomination forms without being in the presence of the signatory. In other cases, it said forms had been backdated.

“Each of these practices fails to comply with the law and may lead to the nominations being invalid,” ASIC said.

 

Miranda Brownlee
25 January 2019
smsfadviser.com

 

3 tips for weathering the market’s bumpy ride

A very interesting graph comparing short term volatility with past long term reality.

           

 

If the recent US stock market gyrations have your head spinning, you’re not alone. With major indices swinging up and down daily, it’s easy to understand why investors might be feeling a bit seasick.

Three thoughts that might help:

  1. Maintain perspective. You’re not imagining things. The markets have been more volatile lately. But you may be surprised to learn that the increased volatility brings us closer to the historical norm. Investors may have anchored their expectations to the lower-than-normal volatility we experienced back in 2017. (See chart below.)
     
  2. Don’t do anything rash. If you’ve been invested for years in a broad, diversified mix of stocks and bonds, your portfolio likely has appreciated. And the risk of timing an investment decision poorly is generally higher than the risk of changing nothing at all in your portfolio. Remember, it’s also a decision to do nothing.
     
  3. Check your asset allocation. If market movements have meaningfully altered the ratio of stocks, bonds and other asset classes in your investment plan, it may make sense to do some rebalancing.

If all this sounds rather familiar and you’re not especially concerned about the market’s fluctuations, I say: thanks for reading.

Don’t let turbulence distract you: keep your focus on the longer term.

Notes: Intraday volatility is calculated as daily range of trading prices [(high-low)/opening price] for the S&P 500 Index.

 

Vanguard Chief Investment Officer Greg Davis offers perspective on recent market movements.
Sources: Vanguard calculations, using data from Bloomberg.
15 January 2019

 

 

Part 4 – The major benefit of ‘behavioural coaching’

 
One important part of a planner’s job, and what adds real value, is being able to keep their clients focused when times are bad.

       

 

Part 4 in the value of financial advice series. The benefits from ‘behavioural coaching*’ by a financial planner is best demonstrated when managing market volatility.

However, this task is often made harder by the media’s apparent need to report things in their worst light.

Negative, rather than positive, commentary always seems to be the norm and the finance industry has copped quite a lot in the past years. But do other professions receive similar treatment where a few bad apples are used to represent all involved? A quick look would indicate the answer is yes.

Take for example shearers, a mainstay of Australia’s culture and history. One online author feels that shearers are getting such a bad deal from commentators that she’s trying to show what the profession is really like. Too often commentators focus only on very negative fringe issues such as how dangerous shearing is to sheep and that there are too many shearers using drugs. It seems that respect is hard to earn but all too easy to lose.

Like shearers, and the rest of us for that matter, planners aren’t all angels but ‘the proof is in the pudding’. Shearers have proven time and again that they are invaluable to the Australian economy. Similarly, and as shown by a ‘Vanguard Investments Pty Ltd 16-year study’, planners, a profession constantly being questioned and undermined, add around 3% to a portfolio’s value over time. This is a very worthwhile benefit.

Some very good examples of the benefits of remaining focused come from the GFC itself. While tough at the time it proved that staying the course, even when common sense and commentators said otherwise, still led to good outcomes for many.

One example of is where investors in the US equity market with a broadly diversified portfolio of 50% stocks and 50% bonds who didn't hit the panic button, saw an average annual return of 7% from the pre-crisis market peak in 2007 through to June of this year.

Another example from the same period shows that those who remained solely with shares did over 35% better.

These figures are based on Vanguard calculations using data provided by FactSet, as at 29 June 2018.

Your financial future is too important to simply react and it’s your planner’s job to see this doesn’t happen in an unmanaged way. The point here is that a financial adviser is often the only person who is in the position to provide the guidance needed when times are volatile.

*The topic covered by Part 3 of this series of articles was ‘behavioural coaching’.

 

Peter Graham
BEc, MBA
PlannerWeb / AcctWeb

Four tips for boosting your super balance

If you could add $61,000 to your super fund in 10 years, would you do it?

       

 

Of course you would, however by choosing, or defaulting into, funds that underperform and charge high fees, you may be leaving money like that on the table.

Super is the biggest investment most Australians will ever make, yet too many unknowingly behave as if they are starring in the TV show, “Married at First Sight.” They commit to something they haven’t gotten to know or understand.

It can be a very expensive error. The recent Productivity Commission estimated that super investors would gain $3.9 billion yearly by choosing better-performing funds and reducing fees by consolidating accounts. That would give a 55-year-old today an additional $61,000 by retirement, and a new job entrant an additional $407,000 when they retire in 2064.

Here’s a few ideas on how to send some of that money your way:

  • Match your investment option to your goals. If you’re young and have many years until retirement, a growth fund may make sense for you. On the other hand, your age may not matter if you have difficulty watching wild market swings. In that case, you may prefer a more conservative option.
     
  • Once you know how you want to invest, compare the long-term performance (five years or more) of funds in that category. Compare growth funds to growth funds, balanced funds to balanced funds, etc, and be aware of differences between funds in the same investment category. Some funds labeled “growth” may have higher allocations to growth assets such as shares and property, compared to another super funds “growth” option, for example. What is important, however, is that you select an asset allocation that matches your financial goals and risk tolerance.
     
  • If you have more than one super fund, consolidate them to eliminate redundant and high fees. This is actually a very easy and profitable move. In most cases, the super fund you decide to consolidate to will have a ‘find my super’ option, and will do all the hard work for you. If you need to know more, the Australian Securities & Investments Commission (ASIC) shows you how here. Be sure to review how switching your super affects any insurance you have with it.
     
  • As we all know from watching the daily gyrations of the share market, you can’t control everything. But you can control your costs, and that will make a huge difference to your super fund over time. According to Canstar, the average cost on an $80,000 super balance ranges from $466 to more than $2,000 – a year. While you cannot control future performance, you can control costs. This ASIC calculator helps you compare funds, including fees.

Finally, don’t make yourself crazy. Constant tinkering is more likely to hurt than help, but do get to know your super and increase your odds of a decades-long blissful union.

 

Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
29 January 2019

 

 

Royal Commission report makes super fee recommendations

You can access the final report here.

       

 

The final Royal Commission report has recommended banning advice fees from MySuper accounts, limiting fees for choice accounts and prohibiting the unsolicited sale or offer of super products.

In his final report for the Royal Commission, Commissioner Kenneth Hayne has recommended an outright ban on the deduction of advice fees from MySuper accounts and limitations on the deduction of advice fees from choice accounts. You can access the final report here also. 

“Deduction of any advice fee, other than for intra-fund advice, from superannuation accounts other than MySuper accounts should be prohibited unless the requirements about annual renewal, prior written identification of service and provision of the client’s express written authority in connection with ongoing fee arrangements are met,” the report stated.

Grandfathering provisions for conflicted remuneration, it said, should be repealed as soon as is reasonably practicable.

The report has also called for the hawking of superannuation products to be prohibited.

“That is, the unsolicited offer or sale of superannuation should be prohibited except to those who are not retail clients and except for offers made under an eligible employee share scheme,” it said.

“The law should be amended to make clear that contact with a person during which one kind of product is offered is unsolicited unless the person attended the meeting, made or received the telephone call, or initiated the contact for the express purpose of inquiring about, discussing or entering into negotiations in relation to the offer of that kind of product.”

The report said that a person to whom an unsolicited offer is made will “very often not be in a position to judge the merit of what is offered”.

“In particular, that person will seldom if ever be in a position to compare what he or she is offered with what he or she already has under some existing superannuation arrangement,” it said.

“That is why the attempts by ANZ and CBA to sell superannuation in bank branches under a ‘general advice’ model may have contravened the law.”

The report also recommended stapling a person to a single default account in order to eliminate multiple accounts.

It also called for tougher penalties for breach of covenants and obligations from trustees of APRA-regulated funds.

“Breach of the trustee’s covenants set out in section 52 or obligations set out in section 29VN, or the director’s covenants set out in section 52A or obligations set out in section 29VO of the SIS Act should be enforceable by action for civil penalty,” it said.

It also said that the roles of ASIC and APRA in relation to superannuation should be adjusted.

 

Miranda Brownlee
04 February 2019
smsfadviser.com

 

Retiring in their 30s or 40s?

The stories about people who have embraced the FIRE — it stands for Financial Independence Retire Early — movement are fascinating. 

       

 

They move to smaller homes, share Netflix accounts and squeeze the most out of every dollar to retire by the time they are in their 30s or 40s.

Once they have accumulated the required amount of money, they stop working and spend more time doing whatever they enjoy. There is always a sense of admiration for people who can be so disciplined and motivated to achieve a certain goal.

That said, just how you get the required level of confidence to have enough saved to maintain even a frugal lifestyle in order to step away from work for possibly the next sixty years is a challenge many of us may struggle with.

The guiding principles behind the FIRE movement are admirable – although it does seem to downplay the fulfilment and sense of community many people get through work. But irrespective of that, there are aspects that may prove difficult for many Australians to follow, particularly because the average super balance for those at or approaching preservation age (55-64 years) is $310,145 for men and $196,409 for women. That's far short of the $640,000 for couples and $545,000 for singles that the Association of Superannuation Funds of Australia estimates is needed for a comfortable retirement.

It's also difficult to imagine that many people will be able set aside half or more of their income, as FIRE guidelines suggest, when they are not accumulating enough even with the tax incentives and employer contributions available in super. Also, some FIRE advocates have been criticised for not mentioning income from their blogs or from a partner who continues working.

So, before you go buying the brown bananas that have become a symbol of the thrifty FIRE lifestyle, assess with a critical eye.

There are many concepts involved in the FIRE philosophy that are commendable – and make sense for people seeking to make their money go further. In many ways, FIRE is simply a new, perhaps trendier name, for what financial experts have always recommended: budgeting properly so that you live beneath, or at least well within, your means.

Pursuing the FIRE strategy can help you take the first step toward good financial health by setting long-term life strategy goals. Maybe you do want to retire early. Or maybe you just want to set aside enough money so that you can work part time while your children are at home. What matters is that you identify your goals and make plans to achieve them.

Thinking about long-term goals can help to clarify what is important to you. A larger house may suit someone who enjoys entertaining and having guests. In other words, some expenditures may be worth it. Budget according to what you value, and you will find opportunities to cut costs in some areas while, perhaps, spending more elsewhere.

Consider what moves will have the most impact. While smashed avocado on toast has become something of a cause for celebration on social media, it's wise to focus first on your largest expenditures, usually housing, transportation and debt. Reducing debt, including paying off credit-card and other bills every month guarantees much lower costs over time. Do you really need that shiny new car?

Young people in particular have an opportunity to capitalise on the benefits of keeping these larger bills manageable.

As you think long-term, consider small changes. Saving 50 per cent of your income is daunting. You don't have to do it all at once. You can start small by finding savings of, say, $50 or $100 a month. Investing what you spend on daily coffee over a month can add up to more than $100,000 over 30 years – not a bad start toward financial independence.

One fundamental way to save is by keeping your investment costs low. Vanguard research shows that an investor who sets aside $100,000 in a portfolio that earns an average of 6 per cent yearly will have $532,899 after 30 years, in a fund that charges 0.25 per cent of assets yearly, compared to $417,357 in a fund that charges 1.07 per cent.

You may or may not want to retire early, but setting long-term goals, budgeting sensibly and keeping costs as low as possible will give you the best chance to have the option.

In the investing world you get what you don't pay for.

 

Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
11 December 2018
vanguardinvestments.com.au

 

ATO targets non-arm’s length income – NALI

Following a series of ATO audits conducted on SMSFs in recent months, the ATO has been applying non-arm’s length income to a number of SMSFs resulting in serious tax consequences for these funds, warns an industry consultant.

       

 

Speaking to SMSF Adviser, super consultant and non-executive director of SuperConcepts, Stuart Forsyth said while the ATO has been conducting a big project on non-arm’s length income for a few years now, in the past six months it has resolved a number of cases and collected significant amounts of money.

Mr Forsyth said he has seen numerous situations recently where the SMSF trustee has advantaged their fund some years ago with a transaction and the commissioner has now issued a position paper to them suggesting that it raise non-arm’s length income against the fund.

The ATO tends to provide a position paper in the latter stages of an audit to explain their position and give the trustee a chance to respond before it finalises the audit.

“In the ones that I’ve seen the trustee has undertaken the transactions but they haven't really gone and got a ruling from the commissioner at the time and they haven't gotten a contemporaneous valuation,” he explained.

“It's difficult to prove after the event, especially when the investment has gone very well, that the fund wasn't advantaged if you hadn’t documented it well at the time.”

A lot of the funds affected have generally been in pension phase so they’ve gone from paying zero tax to 47 or 45 per cent in more recent years, he cautioned.

“There are some serious issues there so if someone plans to advantage their fund in any way or they’re going to deal on a non-arm’s length basis with their fund, then they really need to get advice before they do that so that they've got a defensible position if the commissioner comes along some years later.”

 

Miranda Brownlee
21 December 2018 
smsfadviser.com

Admin, BDBN errors flagged for SMSFs this year

SMSF practitioners and their clients have been cautioned on some of the ongoing mistakes that continue to be made with documentation and some of the newer traps that have cropped up with the changes to superannuation.

         

 

Speaking to SMSF Adviser, SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley said there continues to be a number of administration problems that catch out SMSF trustees.

One of these is property being settled in the wrong name which will often attract the attention of auditors, said Mr Colley.

“Limited recourse borrowing arrangements can sometimes be settled the name of the superannuation fund, rather than the underlying holding trust,” said Mr Colley.

Binding death benefit nominations are another key problem area, he warned.

“Binding death benefit nominations may not have been correctly executed because the witnesses will be parties to the binding death benefit nominations itself, sometimes it won't be dated, other times, a bit like the Narumon case, parties that were not a dependant were mentioned as recipient of that binding death nomination,” Mr Colley explained.

“We've spoken to our clients to try and get them to understand that if they get it wrong, then the money may go to someone else rather than who they think it will go to if they happen to die.”

SMSF professionals with high-net-wealth clients also need to be sure that the client has considered both the accumulation and pension components of their SMSF in their estate planning.

“They've got a pension in the fund but they've now also got an accumulation account which some of them may not have had for up to 10 years when the 2007 changes came in,” said Mr Colley.

“So, they may have covered the allocation of the pension, the death benefit pension, but they may not have covered the amount that's now being transferred over to accumulation phase.”

Advisers should encourage clients to review their binding death benefit nominations, he said, to make sure the member’s total benefit is covered not just the amount that's in pension phase.

There can also be issues with powers of attorney, he said, as clients believe that because they’ve got an enduring power of attorney, that it allows them to be trustee or the fund.

“Sometimes paperwork needs to be done, merely because they're an enduring power of attorney doesn't mean that they'll be a trustee of the fund. Other members or other trustees may need to appoint a new trustee so the trust deed itself is important in terms of working out how that person holding an enduring power of attorney will be appointed as trustee or director of the trustee company,” he said.

“From an administration point of view, you will need to notify ASIC if it’s a company and also the ATO about the change of trustee or director of the trustee company.”

 

Miranda Brownlee
04 January 2019
smsfadviser.com

Verifying asset values in a SMSF.

ATO issues fresh warning on valuations after major cases.

           

 

The ATO has reminded SMSF auditors on their obligations around verifying asset values in the financial statements of SMSFs following the outcome of two cases this year.

In an online update, the ATO stated that under 8.02B of the Superannuation Industry (Supervision) Regulations 1994 (SISR), assets must be valued at market value in the SMSF’s accounts and statements. 

“Two recent cases involving SMSF auditors, Cam & Bear Pty Ltd v McGoldrick [2018] NSWCA 110 and Ryan Wealth Holdings Pty Ltd v Baumgartner [2018] NSWSC 1502, [have] highlighted the obligation of SMSF auditors to verify asset values in the financial statements,” the ATO stated.

The two court cases held SMSF auditors responsible for investment losses. The Cam & Bear Pty Ltd v McGoldrick case was a decision by the NSW Court of Appeal, which ruled that the auditor was negligent in failing to make proper enquiries as to the recoverability of certain investments held in the fund and report back to the trustee.

The second, more recent case, Ryan Wealth Holdings Pty Ltd v Baumgartner, similarly found that the auditor’s failure to detect irregularities in the fund over a number of years meant the SMSF trustee was unable to redeem money lost on a series of unsecured loans.

The ATO stressed that SMSF auditors need to obtain sufficient appropriate audit evidence from SMSF trustees to verify the value of a fund’s investments.

While the ATO said that it is not the auditor’s job to undertake a valuation, it said that they should seek evidence that shows how the asset was valued, including the method used and the data relied upon.

“If the auditor is unable to obtain sufficient verification that material assets are valued at market value, they should qualify the financial and compliance report sections of their SMSF independent auditor’s report stating they have been unable to obtain sufficient appropriate audit evidence to verify the asset values,” the tax office said.

They should also lodge an auditor or actuary contravention report for the contravention and notify the trustees in a management letter, the ATO stated.

The ATO noted that the most common contravention not identified or reported by auditors who were referred to ASIC this year was regulation 8.02B.

SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley previously told SMSF Adviser that where there is limited evidence supplied to the auditor about assets, especially more complex ones, then the fund could be hit with a contravention.

“Next year, advisers and trustees will be required to provide more thorough and comprehensive information to auditors so that they’re satisfied that the fund has made an investment which is recoverable,” Mr Colley said.

“That’s really important, because if the auditor is not satisfied or they can’t see that it’s recoverable, then they’ll likely qualify the accounts of the fund, fill out a contravention report and let the ATO work out whether the investment is recoverable under the operation of the SIS legislation.”

 

Miranda Brownlee
19 December 2018
smsfadviser.com

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