Stuart Forsyth, ATO opened the meeting. Stuart welcomed the group and thanked them for attending.
The minutes from the previous meeting were accepted.
A discussion on transactions that contravene section 66 was continued from the previous meeting. Stuart Forsyth, ATO advised that this is an issue that the ATO continues to investigate. Stuart emphasised that reversing a transaction does not remove the contravention, and is also not required by law. However, in certain situations reversing a transaction is seen by the ATO as a fund wanting to comply with the law and can lessen the risk of a fund being made non-complying. The difficulties of reversing certain transactions after a period of time is recognised by the ATO and considered by the ATO during any compliance action.
The ATO asked that auditors continue to be advised to report breaches and to rectify if possible. The ATO will consider whether guidance materials need to be revised.
The members also discussed the role of auditors in the rectification process. All members agreed that in theory it is not part of the role of the auditor, however in practice the auditors are involved and in particular can report in an ACR that a contravention has already been rectified. The ATO advised that the ATO does check some rectification actions to ensure that they have actually taken place.
The group also discussed whether there was some scope for this issue to be addressed as part of the Stronger Super reforms.
Tony Xinis, ATO provided the group with an update on the professional to professional service.
Tony advised that the evaluation of the pilot had been completed. Feedback from respondents was largely positive; however there was a perception among approved auditors that if the service was expanded to other professionals service levels from the ATO would reduce.
The ATO advised that a cautious approach to implementation was being taken given the large amount of resources needed to ensure the service works effectively. The ATO was currently considering a proposal to roll out the service to the top 100 auditors (by number of audits completed) before rolling the service out further. These 100 auditors account for around 25-30% of the market.
Michael Davison, CPA Australia asked if the ATO thought that those auditors would already have the knowledge required to address most issues, and probably have the resources available to conduct their own research.
Liz Westover, ICAA stated that during GST implementation several firms advertised that they had direct access to the ATO, and tried to use this as a competitive advantage.
Sharif Eldebs, CPA Australia advised that he had used the service during the trial. Sharif also discussed that he considered using the service more but had the resources to have the research done himself. Sharif also discussed that while large firms have their own teams to consider tax issues, some would consider obtaining an ATO opinion as superior to an internal opinion.
Susan Orchard, ICAA questioned that if the practitioners doing their own research can't form a view about a particular issue, can the ATO? Stuart Forsyth advised that it is good for the ATO to continually consider precedential issues and to see what issues are being raised out in the industry.
Richard Smith, SPAA asked if outcomes of issues raised during the pilot would be considered in eSAT. Tony advised that some issues and case studies will be included in the next version of eSAT and that common enquiries are collated and fed to the communications team to be considered as appropriate for ATO communications.
Stuart Forsyth also advised that the ATO was working out distinctions between the different professional to professional services now being offered by the ATO.
Pedro Cafe, ATO joined the meeting to discuss potential changes to the 2011 ACR form and instructions.
Proposed changes were discussed and feedback obtained from members. The ATO advised that there would be further consultation with members out of session.
Susan Orchard, ICAA requested that the ATO include in instructions an example case study where the auditor has formed a view about a fund, but not finished the audit due to being removed by the fund as the auditor. Susan also raised that there is currently no requirement for a fund to notify an auditor that they no longer required the services of the auditor. While recognising some of these issues related to broader professional obligations, the ATO agreed to look at the issues and advised that some issues may fall into scope of the Stronger Super measures.
Action item
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AAWG-040411-02
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Description
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ATO to consider issues raised in relation to auditors who have commenced an audit but been removed by the fund prior to completion.
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Responsibility
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ATO
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Due date
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Update to next AAWG meeting
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The proposed 2011 SMSF independent audit report was discussed and feedback sought from members.
Sharif Eldebs mentioned that APRA had changed the word 'opinion' with 'conclusion' but that the ATO had not made the same change.
Tony Xinis advised that changes to the instrument for the new audit report means the report would be able to be submitted electronically to clients, which was well received by members.
Liz Westover, ICAA advised that she had received a number of comments and would collate them and respond to the ATO out of session.
Earlier email message to forum members required feedback by close of business Friday the 8th April.
Tony Xinis provided information on the outcome of the mail-out strategy to auditors conducting only one or two audits in a year.
Tony advised that there had been a 60% response rate to the ATO mail-out, with 65% of respondents advising that they did not intend to conduct future SMSF audits.
Tony also advised that the ATO will monitor the activity of those who said they wouldn't conduct any future audits and also risk assess non-respondents to see if any investigation is warranted.
The ATO is considering conducting another mail-out but will consult with the members before taking any further action.
Stuart Forsyth advised that the ATO was still confirming internal advice on whether an auditor is required in situations where a return is not required. Stuart wanted to flag the issue with members and advise them of the work being undertaken by the ATO.
Stuart advised that the ATO will bring this issue to a future meeting.
The group held a discussion regarding the use of eSAT and whether auditors of SMSFs should be required to use the tool, including for the lodgment of nil reports. There was also some discussion regarding whether the ATO should link lodgment of an SMSF return with lodgment of an audit report.
Industry representatives all agreed that it should be compulsory to use eSAT to lodge ACRs.
Bob Duncan, ATMA provided positive feedback regarding the tool, but advised that in discussing with his members may people don't know about it.
The ATO agreed to consider current communication about the tool and look for ways to increase awareness. The associations were supportive of promoting eSAT through articles to their members.
There was a discussion regarding the operation of the Stronger Super SMSF consultation group. Stuart Forsyth advised that the group was working through the recommendations, with findings to be presented to the Peak consultative group who would make final recommendations on policy.
Richard Smith, SPAA raised some issues for guidance from the ATO.
1. Options trading
Richard asked about the responsibilities for an auditor who finds a self managed fund trading in options.
Stuart Forsyth advised that the ATO considers this issue similar to contracts for difference. Stuart advised that the ATO cannot stop speculation by funds, and advises that funds should be cautious in undertaking such activity. The ATO agreed to draft some advice relating to this issue; however some members questioned whether issuing advice would attract funds to the idea of option trading.
Action item
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AAWG-040411-03
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Description
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ATO to consider issues relating to SMSF investment in option trading, and if appropriate to issue guidance on ATO view.
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Responsibility
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ATO
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Due date
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Update to next AAWG meeting
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2. Assets
Richard Smith asked about the ATO's preferred approach that assets held by a fund should be in the name of the fund or otherwise the names of all trustees in trust for the fund.
Stuart Forsyth advised that he already has undertaken to revise words in eSAT.
Richard discussed that there is currently an issue in the industry in relation to this issue and insurance policies. The fund pays insurance premiums, however won't allow the premium to be in the name of the fund so policies are in the name of the individual. On paying out an insurance policy, insurers will pay to a beneficiary but not to the fund. Richard undertook to provide a case study for consideration by the ATO.
Action item
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AAWG-040411-04
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Description
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Richard Smith to provide a case study on issues with insurance policies for consideration by the ATO.
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Responsibility
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SPAA
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Due date
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30 April 2011
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3. Application of section 109 and related party loans
Stuart Forsyth advised that this issue is still with the centre of expertise for consideration.
4. Trust deeds
Susan Orchard, ICAA raised an issue in relation to certain trust deeds stating that only a member application form is required for membership, then on auditing the fund there is no balance for the member. David Burrows, NTAA advised that in a recent meeting the consensus was to go by the clauses of the trust deed.
The next meeting is currently scheduled for mid-May. Stuart Forsyth advised that this might be delayed to early June. Stuart also advised that if there is anything in the Federal Budget requiring discussion a teleconference will be arranged.
Last Modified: Wednesday, 6 July 2011