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I have a fund I am auditing for the first time, which has a number of shares and managed funds, all of which are held in the name of two trustees in trust for the super fund. There are four trustees of the fund (and have been since 2006), but this has never been noted or corrected.
My audit software is noting this as a breach of SISA 52B(2)(d) and SISR 4.09A, both of which refer to separation of assets. SISA 52B(2)(d) is not an option to report on the contravention report, and I'm not sure that 4.09A is appropriate either - they have kept the fund assets separate from the trustees personal assets, they just haven't listed all the trustees.
Is this a reportable breach, or a management letter issue?
Thank you
Hi Megan
Thanks, this is a common issue & a similar query has been raised previously.
The shares are held in 2 of the trustees names in trust for the Superannuation Fund. The Fund does however have 4 trustees.
Re the share ownership issue Regulation 4.09A of SIS requires that:
"A trustee of a regulated superannuation fund that is a self managed superannuation fund must keep the money and other assets of the fund separate from any money and assets, respectively:
(a) that are held by the trustee personally; or
(b) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund."
My view is that if the investments are in the name of 2 of the trustees in trust for the Fund it is technically not a breach of Regulation 4.09A as the assets are kept separate from any personal assets (as it is in the name of the Fund). On that basis it is not a reportable breach in the ACR but I would raise the issue in your management letter to the trustees.
An acknowledgement of trust should be requested to state that the 2 trustees hold the shares / investments in trust for the Fund (& noting that there are 4 individual trustees). This would be best practice.
The ATO gives guidance on Regulation 4.09A of SIS & states at:
https://www.ato.gov.au/super/self-managed-super-funds/smsf-auditors/auditing-an-smsf/compliance-audit/
"The auditor should obtain evidence that the fund’s money and assets are held separately from money and assets held personally by the trustees or a standard employer-sponsor by:
· sighting asset ownership documents, including bank statements, to verify SMSF assets are held in the name of trustees on behalf of the fund (for example, R & J Smith as trustees for the Smith SMSF or R Smith Pty Ltd as trustee for the Smith SMSF) and not in the name of the trustees alone
· where State law prevents ownership in the SMSF’s name, checking for alternative documentation that protects the fund’s assets (for example, a valid declaration of trust)
· reviewing transactions on bank statements to ensure fund money is not mixed with money belonging to related parties of the SMSF.
Where there has been a change in trustees, the auditor should obtain evidence that ownership documents reflect the change."
It would be great to get other members view on this issue as it is a common issue faced by auditors.
Thanks
SMSF AAA