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Auditors Institute

Oct 29, 2020

CBA Sent A Cheque For A Closed Fund

in SMSF Technical Forum

I audited a fund which was closed down in March 2020 - last tax returns were lodged and the bank account closed after the roll over. Comsec bank account was closed as it had some money which were transferred to the SMSF bank account for the final roll over to an industry fund.

I just got a call from the accountant that the Comsec has sent a cheque to the Trustee of $8,000 as there was a mistake in one buy/sell which was found out about three years later (for the year which I did not audit) and the accountant is asking me - what to do with the cheque as the ABN of the fund is also closed by the ATO after receiving final return in March 2020.

Any Ideas .....

Manoj Abichandani

2 answers1 reply

Comments (3)

Auditors Institute

Oct 29, 2020

The problem is that the fund has been wrapped up by ATO - the TFN / ABN has been cancelled - and the cheq is in the name of the fund. Trustee cannot bank it in his own bank account - he tried and the bank said NO. Luckily there is no tax consequence as the members are in pension phase - they are in their 80's - don't want to run an SMSF - just rolled over everything to a public offer fund.

I think there are only two options

Set up a new fund with a new name and deposit the cheque and close the fund again after the roll over or
The cheque is processed via accountants trust account

any other ideas .....

Manoj Abichandani

Eric Taylor

Oct 30, 2020

Replying to

Manoj,

Certainly outside the scope of the audit that you conducted. I see this as a case of practicality being required, probably together with simplicity. Based on your info, the members have met a condition of release, so have an entitlement to the funds, and that there are no tax consequences.

Probably the correct answer is to have the ATO "reactivate" the original SMSF, so the TFN and ABN become valid again. It would mean amended 2020 financials & annual return, plus for 2021. The value brought to account as a prior year adjustment & debtor.

Having said that, my suggestion (not advice) to the accountant would be to deposit the cheque into the trust account. Your thought of a new SMSF for the short term has flaws, in that it is not the fund the money belongs to, and would have high costs in relation to the amount concerned. I would, however, suggest the accountant advise the ATO of the situation, including that the members had met a condition of release and the funds released to them as a deemed pension. If the ATO then come back and say they want returns amended, so be it, but I suspect they may accept the payment as it would have not tax consequence. Above all, the accountant needs to document the situation.