PART B COMPLIANCE ENGAGEMENT
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The compliance engagement of a SMSF is driven by the provisions of the SISA and SISR specified in the approved form auditor’s report and in the ACR, which comprise the compliance criteria for the engagement. These criteria can be grouped within the following categories:
- establishment and operation of the SMSF;
- sole purpose;
- investment considerations;
- benefits restrictions;
- contributions restrictions;
- investment returns;
- solvency; and
- other regulatory information.
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The specific criteria and corresponding provisions of the SISA and SISR, which are required to be reported on in the auditor’s report and the ACR under each of these categories, are listed in Table 1 below. From time to time, the SISA, SISR and the approved form auditor’s report may be amended and new Tax Rulings and Interpretive Decisions may be issued by the ATO. In these circumstances, the auditor will need to adapt the approach in this Guidance Statement to address changes to the compliance criteria.
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The auditor may use a checklist as an aid in conducting and documenting the compliance engagement. Standardised checklists are available from a number of professional organisations. Auditors verify the completeness of any compliance checklist they use to ensure it covers all relevant provisions, as the Independent Auditor’s Report is updated annually.[132]
Table 1: Summary of Criteria for Compliance Engagement
This table provides a summary of the sections of the SISA and SISR which are the criteria reported on in Part B: Compliance report of the approved form auditor’s report and/or in the ACR.
|
Category |
Specific Criteria |
Auditor’s Report[133] Part B SISA/SISR |
ACR[134] SISA/SISR |
|
Establishment and operation of the SMSF |
Meets the definition of a SMSF. |
S.17A |
S.17A |
|
Trustees are not disqualified persons. |
S.126K |
S.126K |
|
|
Maintains minutes and records for at least 10 years. |
S.103 |
S.103 |
|
|
Maintains records of changes to trustees |
S.104 |
|
|
|
Maintains trustees’ declarations about understanding their duties for those who become trustees for the first time after 30 June 2007, kept for as long as relevant or at least for 10 years. |
S.104A |
S.104A |
|
|
Maintains up to date records of all trustee changes, and copies of consent to act for a period of at least 10 years. |
S.104 |
- |
|
|
Maintains copies of all member or beneficiary reports for a minimum of 10 years. |
S.105 |
- |
|
|
Proper accounting records kept and retained for at least 5 years. |
S.35AE |
- |
|
|
Annual financial report prepared, signed and retained for 5 years. |
S.35B |
- |
|
|
Trustee provides auditor documents within 14 days of written request. |
S.35C(2) |
S.35C(2) |
|
|
Trustees formulate, review regularly and give effect to an investment strategy. |
R.4.09 |
R.4.09 |
|
|
Sole purpose |
Established for the sole purpose of funding a member’s benefits for retirement, attainment of a certain age, death, ill‑health or termination of employment. |
S.62 |
S.62 |
|
Investment considerations |
Restrictions on investments in collectables and personal use assets |
R.13.18AA |
R.13.18AA |
|
Restrictions on acquiring or holding “in‑house” assets. |
Ss.82‑85 |
Ss.82 -.85 |
|
|
Restrictions on acquisitions of assets from related parties. |
S.66 |
S.66 |
|
|
Maintains arm’s length investments. |
S.109 |
S.109 |
|
|
Maintains SMSF money and other assets separate from those of the trustees, employer‑sponsors and other related parties. |
R.4.09A |
S.52B(2)(d) |
|
|
Prohibition on lending or providing financial assistance to member or relative. |
S.65 |
S.65 |
|
|
Restrictions on borrowings. |
S.67, S.67A, S.67B |
S.67 |
|
|
Prohibition on charges over SMSF assets. |
R.13.14 |
R.13.14 |
|
|
Assets valued at market value |
R.8.02B |
R.8.02B |
|
|
Benefits restrictions |
Trustees maintain members’ minimum benefits. |
R.5.08 |
R.5.08 |
|
Minimum pension amount to be paid annually. |
R.1.06(9A) |
- |
|
|
Restrictions on payment of benefits. |
R.6.17 |
R.6.17 |
|
|
|
Prohibition on assignment of members’ superannuation interest. |
R.13.12 |
- |
|
|
Prohibition on creating charges over members’ benefits. |
R.13.13 |
- |
|
Contributions restrictions |
Accepts contributions within specified restrictions. |
R.7.04 |
R.7.04 |
|
Investment returns |
Reserves to be used appropriately and investment returns must be allocated to members’ accounts in a manner that is fair and reasonable. |
R.5.03 |
- |
|
Solvency |
Unsatisfactory financial position. |
- |
S.130[135] |
|
Other regulatory information |
Information regarding the SMSF or trustees which may assist the ATO, including compliance with other relevant SISA sections and SISR regulations. |
- |
Ss129S and 130A[136] |
The ATO’s electronic superannuation audit tool (eSAT), may provide assistance and is available on the ATO website.
Self-Managed Superannuation Fund Independent Auditor’s Report for periods commencing 1 July 2019 (NAT 11466).
Auditor/actuary contravention report (ACR) (NAT 11239) available through the ATO’s website using eSAT or by ordering a paper form.
Unsatisfactory financial position is reported separately from other contraventions in Section F of the ACR and the seven tests set out in the ACR instructions are not applicable. Also see regulation 9.04 of the SISR for the narrow definition of ‘unsatisfactory financial position.’
Other regulatory information is reported separately from other contraventions in Section G of the ACR and the seven tests set out in the ACR instructions are not applicable.