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SMSF with a corporate trustee, sole director and sole member of the Fund. Member retired, 89 years of age and drawing a pension, with the main asset consisting of a share portfolio of listed shares (actively traded). First year I have audited the Fund and the previous year's audit report was unqualified and without a management letter.
Member contributions have been made in each of the last 3 years. I have suggested that the contributions for those 3 years be returned. What action should the auditor take in respect of ATO contravention report, qualified audit report and management letter?
Hi Brian
Yes I agree a member receiving member personal contributions at the age of 89 is a breach of regulation 7.04. As per regulation 7.04 the only contributions that can be made once a member reaches age 75 is "mandated employer contributions or downsizer contributions".
Under regulation 7.04(4) the Fund has 30 days of becoming aware to return the contribution and it will not be in breach of the rules (& the Fund does not have to report the contribution).
From an audit perspective my view would be to make them return the contribution for the 2020/21 year (the year you are auditing) within 30 days. By doing this for the 2020/21 year there would be no qualified audit report or ACR required. I would refer to this in your management letter and also refer to the issue in the 2 earlier years.
In the financial statements the 2020/21 contributions received in error would be taken up as a liability (rather than as a contribution).
I agree the contributions in the 2 earlier years should be returned and this would in my view be done by amending the tax returns for these years and not showing them as contributions.
It would be great to get other members views as to how they would approach this issue.
Thanks
SMSF AAA