Action item updates
Action Item 04.04122023 - ATO web content refresh project finalised March 2025 - Closed
Content has now been updated as part of the refresh project to include information on how the auditor needs to ensure that when conducting section 82 compliance checks they check the level of in-house assets as at the end of the previous financial year. Introductory content was added to the in-house asset compliance checks that help explain the interaction between the provisions. There were no objections from the group to close this item.
Action Item 01.02072024 - Changes to ACR instructions Closed.
Auditor contravention report (ACR) reporting expectations in relation to market valuations and custodial held investments by service organisations was discussed. ACR instructions were updated in March 2025 advising auditors they can use their professional judgment in deciding whether to lodge an ACR for a low-risk regulation 8.02B contravention for these types of investments.
The risk may be considered low if the modification of Part B of the independent audit report is solely by virtue of a modification of Part A due to the inability to obtain sufficient appropriate audit evidence over the rights and obligations assertion of investments managed by a service organisation, leading to the inability to ensure the assets have been reported at market value.
Auditor Guidance recently published
Trustee Declaration s104A compliance checks auditor web content was updated in May to advise auditor they must check the trustee has retained the declaration for as long as it is relevant, being for as long as trustee is appointed. Retention period was previously 10 years, but this was not in accordance with the law.
New Action item 01.08072025
The ATO to come back to group with a view regarding expectations around rectification and reporting requirements for clients now impacted by the web content update.
Proposed auditor guidance to be issued on ownership and separation of fund assets. This was drafted in consultation with the group in 2023 but was not published due to the web content refresh project. We are now looking to publish it but would like the group to provide further feedback
Some members have already looked at the proposed advice and provided feedback prior to the meeting. Most found it useful and called out the importance of ensuring that where fund assets are not in the correct title showing they belong to the fund, auditors will raise this in the management letter advising trustees to rectify the issue.
Where there is no rectification in the following financial year some will then lodge an ACR. This is because in addition to the compliance risks auditors can be exposed to a litigation risk if there are any future disputes about fund asset ownership.
Action Item 01.04122023 - Non-arm's length expenses (NALE) auditor guidance
The 'SMSF approved auditors proposed NALE guidance’ document was discussed. Feedback provided in January 2025 was that some thought the guidance wasn’t necessary as it is already covered in LCR 2021/2 or ascertaining trustee services provided to fund and in what capacity can be achieved by the trustee representation letter. Also issues around materiality regarding general expenses. Some members think the more important issue is around ensuring adequate guidance is provided in terms of auditors verifying arm’s length expenses for specific fund expenditure related to property acquisitions or related party leases.
The ATO advised the relevant ruling LCR2021/2 is still in draft form, although industry consultation was finalised several months ago. This issue will be held over until the meeting in December 2025 where we anticipate the final version of the LCR will be issued.
Better targeted super concessions policy
The following update on the better targeted super concessions (BTSC) was discussed with the topics being general in nature given that legislation has not passed, the discission included:
- The BTSC measure has 2 changes
- the definition of total superannuation balance (TSB)
- the introduction of a new tax called division296 tax.
- The measure has a proposed start date of 1 July 2025 with the TSB change commencing just before 1 July 2025, the change will apply to the 30 June 2025 TSB calculation.
- A tax of 15%, called division 296 tax, applies to super earnings that relate to the portion of an individual’s TSB that exceeds the large super balance threshold of $3 million for an income year.
- The first year this tax applies is the 2025-26 income year.
- The tax is imposed directly on the individual and is separate to income tax and tax the super fund pays.
- The individual will receive a division 296 tax Notice of assessment (NOA) which is payable 84 days after the date of the NOA.
- The individual can pay their division 296 tax liability themselves or they can elect, within 60 days of the NOA to withdraw money from their super fund to pay debt.
- If the debt is not paid by the due date the Commissioner of Taxation can issue a default release authority to the individual’s fund to have money released to pay the debt.
- If the division 296 tax relates to a defined benefit interest in accumulation phase, the debt will be deferred until 21 days after the first benefit is paid from their interest in the defined benefit fund.
- Any deferred debts that are not paid by 30 June each year will attract end of year interest.
- Individuals may have carried forward negative super earnings where their basic super earnings are less than nil in an income year, these can be used to reduce their earnings in future years.
- We need specific information from funds to be able to complete the division 296 tax calculation. For SMSFs we will be getting this information from them via 2 new labels that will be added to the 2026 SMSF annual return (SAR).
- SMSFs will report certain division 296 tax contributions and tax withdrawals via these labels, the SAR instructions will be updated to provide guidance on what to report at these labels.
The ATO concluded that once legislation has passed, the group will be advised of the strategies.
Australian Securities and Investments Commission
There were 48 reportable decisions made in the 2025 financial year including:
- The disqualification of 7 auditors concerning a range of serious independence and/or audit quality issues.
- The suspension of 3 SMSF auditors concerning single source referrals.
- There were 14 sets of conditions applied with 5 related to in house audits.
- Australian Securities and Investments Commission (ASIC) initiated 24 cancellations, mainly related to auditors who no longer did any auditing work or had not lodged multiple years of annual statements.
- The main systemic concern in addition to audit quality issues continues to be in house audits, especially sole practitioners engaging in prohibited non-assurance services including the preparation of financial accounts. This gives rise to the issue of whether those services are ‘routine or mechanical’.
- Recent tribunal decision of Sidhu and Australian Securities and Investments Commission [2025] ARTA 994 (7 July 2025) was discussed as an example involving in house audits.
Auditing and Assurance Standards Board
Service organisation – guidance statement (GS) 007 Review - GS 007 is linked to the international standard ISA / Australian Standard Association (ASA) 402 and ISAE/ASAE 3402. A project advisory group has been established for the GS 007 project and 3 meetings have already been undertaken.
The Auditing and Assurance Standards Board (AUASB) welcomes any feedback regarding GS 007 guidance or issues faced by practitioners when using the reports of a service organisation auditor.
As this project is a revision to a GS this pronouncement is not required to be exposed.
GS 011 – third party access to auditing working papers. Concerns around changes to ASA 600 group audits to be considered in this revision. GS 011 is likely to go back to the AUASB at September 2025 meeting.
GS 002 Audit Implications of Prudential Reporting Requirements for Registered Superannuation Entities is being reviewed in 2 parts.
- Part 1 - Previously Australian Prudential Regulation Authority (APRA) updated approved audit form for RSEs and AUASB taking this over for compliance part of the approved form.
This illustrative report once completed will be available on the AUASB website. APRA / ASIC retaining financial statement part of the form.
- Part 2 – general revision of GS 002. Feedback from APRA has been sort and once this has been completed. The draft will go out to the auditors of RSE’s for comment.
Sustainability assurance – a large part of the ongoing AUASB agenda. Focus now is on several areas being facts and questions, education materials on implementation of ASSA 5000 and illustrative audit reports under the new legislation and AASB S2.
Fact sheet on consideration for auditors in the use of Artificial Intelligence on engagements will be issued in the next few weeks.
The group asked about whether AUASB was speaking to platform providers as part of the GS007 review.
- AUASB said firms and professional bodies on the project advisory group have been contacted but not sure if they have consulted platform providers. Mix of GS 007 issues around use of these reports and technology as the scope of the project relates to financial statement audit rather than technology. AUASB to confirm this with the group.
Another group member stated that they are starting to see reports for crypto platforms that are called type 2 control reports, but don’t really meet the definition.
- AUASB could provide an education piece for auditors, so they understand how to confirm they are type 2 control reports. This piece could form part of future working group considerations.
ATO - Compliance results
The ATO tabled the SMSF auditor compliance report for the period 1 July 2024 to 30 June 2025. The report identified that:
- Just over 200 reviews of auditors were completed during the 2024-2025 financial year.
- There were 41 auditors referred to ASIC and 36 voluntarily cancelled their registration once we commenced a review.
- Referrals to ASIC were mainly because of auditors failing to obtain sufficient and appropriate audit evidence as part of their audit and for conducting in-house audits.
- Our market valuation and disqualified trustee reviews resulted in educating 51 auditors on their obligations.
- Initial evaluation of our market valuation letter campaign indicates it has been partially effective at changing trustee behaviour. Around 63% of funds have changed property valuations and 45% have changed unlisted trust investments.
- Highest contraventions reported for 2023 audit year were
- S65 – loans to members (15%)
- R4.09A – separation of assets (13%)
- R8.02B – assets not at market value (11%)
- We completed 16 high volume auditor reviews which mainly resulted in education. We saw an increase in ACR lodgments in this group from 2.2% to 3.6% post our review. This program will remain a focus for 2024-25.
- Upcoming programs for 2025-26 include
- high risk auditorsh
- high volume reviews
- in-house audit reviews
- market valuation reviews
- PII and CPD reviews.
The top 5 key compliance issues that were identified included:
- Lack of confirmation that transactions are conducted at arm’s length under section 109.
- Failure to obtain sufficient appropriate audit evidence to support fund’s assets valued at market value reg 8.02B.
- Failure to check that the fund did not have a charge over any of its assets reg 13.14.
- Failure to adequately check whether the funds borrowings complied with section 67.
- Failure to check a fund had signed financial statements section 35B.
Other business
A member enquired about whether improvements will be made to Online services for business to enable the saving and storing of ACRs.
The ATO confirmed we are aware of this issue; however it is not our highest priority at present due to current funding commitments.