Action items
Updates on self-managed superannuation fund (SMSF) Audit Guidance and Compliance:
- The ATO provided updates on recent and upcoming changes to SMSF audit guidance, including trustee declarations, audit opinion instructions, crypto asset auditing, section 66 breaches, and SMSF establishment costs.
Reporting section 104A contraventions – trustee declarations:
- New content in relation to how to report a section 104A contravention where the trustee has to sign a new trustee declaration was added to the Auditor Contravention Report (ACR) instructions in early November 2025, how to complete the ACR form.
Audit Opinion Changes, effective 2026 SMSF annual return (SARs):
- Label 6 of the SMSF Annual Return Instructions for 2025–26 have been amended to make it clear that a qualified audit opinion for Part A and Part B includes an adverse and a disclaimer of opinion.
- The process is underway to update the SAR itself, but this will not be ready by 2026.
Crypto Asset Auditing Guidance:
- Progress has been made on developing guidance for auditing crypto assets. We plan to release this to the group for comment in early 2026, action item 01.10122025.
Section 66 contraventions:
- The ACR instructions will be amended in early 2026 to make it clear that section 66 contraventions are not rectifiable because they occur at the point of acquisition and are not an ongoing breach, action item 02.10122025.
SMSF Establishment Costs Treatment:
- Guidance on the treatment of SMSF establishment costs paid by members will be issued early in 2026 as we have noticed some auditors are treating the reimbursement of these expenses from the fund as borrowings.
Feedback and action items:
The group was asked to provide feedback on the SMSF establishment costs guidance by 19 December, with the option to extend to January 2026 if needed, action item 03.10122025.
Proposed NALI guidance for auditors
Non-Arm’s Length Income (NALI) Guidance, action item 04122023 closed:
- The ATO discussed with the group whether there is a need for additional NALI guidance for auditors, ultimately concluding that existing resources are sufficient and further guidance will not be published at this time.
- The ATO clarified that auditors are expected to document their consideration of NALI risks and qualify Part A where they identify any fund expenditure that is non-arm’s length and material. This is more likely to arise in situations where the fund incurs expenditure relating to a specific asset from a related party like acquiring a property at less than market value.
Closure of action item 04122023:
- Group consensus confirmed that the draft NALI guidance need not be published.
Auditing and Assurance Standards Board
There is ongoing work related to revised standards (ASA 570 and 240), and updates to various guidance statements:
- GS009 – not currently scheduled for revision but under consideration for future updates.
- GS002 – Audit Implications of Prudential Reporting Requirements for Registered Superannuation Entities will go to the Board for review in February 2026.
- GS11 – Third Party Access to Working papers should be finalised in the near future.
- GS13 – Special Considerations in the Audit of Compliance Plans of Managed Investment Schemes and GS14 – Auditing Mortgage Schemes, are currently being looked at to determine if they are still required and used in practice.
- GS15 – Audit Implications of Accounting for Investments in Associates and Joint Ventures is currently being reviewed to determine if still required and used in practice.
- GS007 – this project is well underway having had seven project advisory group meetings. Key issues being looked at include Subservice Organisations (SSOs), gap periods, controls testing and other challenges.
Australian Securities and Investments Commission
Australian Securities and Investments Commission (ASIC)’s recent enforcement actions for the financial year, include:
- Disqualifications 4 (2 from ATO referrals, 2 from internal matters)
- ASIC initiated cancellations 21 (11 from ATO referrals, 10 from internal matters)
- Conditions imposed on auditors 2 (2 from ATO referrals, 0 from internal matters)
- Voluntary cancellations 6 (5 from ATO referrals, 1 from internal matters).
Main deficiencies identified have been in relation to:
- Independence issues
- Audit deficiencies and quality
- Outstanding annual statements
- Non-compliance with conditions
- Insufficient evidence for asset ownership
- Market valuations
- Compliance with limited recourse borrowing arrangements requirements.
Division 296
The following update was provided on the government’s proposed changes to better targeted super concessions and Division 296, including new thresholds, reporting requirements, and the shift to realised earnings.
Policy Changes and Implementation:
- Updates discussed regarding the introduction of indexed $3 million and $10 million thresholds.
- The move to realised earnings, and a two-tiered tax rate.
- The ATO is still awaiting final policy parameters from government before we can confirm further reporting requirements.
Reporting and Data Collection:
- The ATO expects to collect realised earnings data from funds, with changes to the SMSF annual return anticipated for the 2027 financial year.
- The specifics of data labels and calculations will depend on final legislation.
Guidance on Fair and Reasonable Attribution:
- Issues around guidance on fair and reasonable attribution of earnings were raised. It was confirmed that guidance will be prioritized based on industry needs once policy details are settled.
Payday Super and SuperStream compliance for SMSFs
The ATO briefed the group on the upcoming Payday Super requirements, the need for SMSFs to prepare for new payment platforms, and the limited role auditors will play, focusing on education and communication rather than direct compliance checks.
Auditors will not be expected to report SuperStream contraventions in the ACR or independent audit report, as it is difficult to detect non-compliance through audit procedures; their main role will be to help educate trustees and tax agents about the changes where they can.
The ATO with the help of the professional associations will distribute information sheets and updates to ensure broad awareness among SMSF trustees, tax agents, and auditors, with suggestions for targeted communication to those funds receiving SG contributions.
ATO compliance program
The ATO tabled its compliance results for the period 1 July 2025 to 30 November 2025.
The ATO has completed numerous high-risk auditor audits, high volume auditor reviews, market value reviews, and disqualified trustee reviews for the first half of this financial year, with outcomes ranging from ASIC referrals to education and voluntary cancellations.
Key deficiencies identified included lack of evidence for asset ownership and existence, failure to obtain sufficient appropriate audit evidence to support the market valuation of fund assets, that the fund did not have a charge over any of its assets, that fund borrowings complied with section 67 of Superannuation Industry Act 1993, and insufficient documentation of the audit in line with ASA 230, prompting a recent ATO article and web content updates.
The ATO is monitoring auditor lodgement obligations, selecting cases where auditors have outstanding SMSF returns, with non-engagement or serious contraventions potentially leading to ASIC referrals.
Current compliance checks for section 126K
The ATO led a discussion on the expectations for auditors to verify trustee eligibility under section 126K on the practicality and scope of checking various registers and the use of representation letters. It was acknowledged that current ATO guidance may overstate the need to check multiple registers.
The ATO agreed to update their guidance on compliance checks for section 126K to align with GS009 and clarify expectations regarding which registers auditors should check action item 04.10122023.
Other business – Lease agreements
Lease agreements as audit evidence:
- ATO led a discussion on whether lease agreements should be required on all SMSF audit files, perspectives on when such documentation is necessary and what constitutes sufficient audit evidence.
- Members noted that lease agreements are not always necessary, especially for residential unrelated party leases managed by agents, where agent statements provide sufficient evidence of rental income and terms.
- For related party leases, the group agreed that lease agreements and market value assessments are essential to demonstrate compliance with section 109 and ensure arm’s length terms.
ATO position and next steps:
- The ATO committed to reviewing its position and providing further guidance when finalised, action item 10122025.