Swimming between the tax flags

SELF managed super funds (SMSF) are now the largest sector in the $1 trillion plus superannuation market.

According to Carolyn Baker, principle of CJ Baker & Associates, the latest figures show SMSF are now the largest in the market, accounting for 30.4 per cent and totalling $326 billion.

"Especially in these times, the ATO has instigated a number of measures to ensure trustees are aware of their responsibilities and potential compliance issues are identified early," says Baker.

"All SMSFs are required to be audited each year. One of the biggest issues is the quality and independence of audits.

"In an audit of auditors the ATO has found in 25 per cent of cases the same firm is still doing both the accounts and audit of SMSFs.

"This really doesn’t provide the arms length they’d like to see and is a wake-up call for both trustees of SMSFs and their auditors because the ATO really means business."

With extra funding the ATO has had to employ more than 200 compliance staff, with audits expected to reach 11,000 or more, up from the 3600 conducted in the 2006-07 financial year.

"For example since 2004 when auditor’s contravention reports were first established by the ATO there have been over 24,000 reports lodged regarding breaches from SMSFs. Of these, breaches 19 per cent related to funds that had lent money to members," says Baker.

Baker says the clear message from the ATO is awareness.

"ASIC is also embarking on a campaign to ensure trustees are ‘swimming between the flags’ and if they want to venture further should ensure they are either strong swimmers or have a helping hand," she says.