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I am auditing a super fund with a property in Greece and an Australian bank account that receives SGC contributions. The fund has a corporate trustee, but the property is under one of the member’s names. I suspect the super fund has never received any rent from the property, definitely not in the last four years.
I can request a declaration of Trust regarding the property ownership and investment strategy covering the objectives and risks etc.
It appears that the investment property in Greece might be an issue from the sole purpose test point of view. What other issues can you think of? Given that the property is not generating any income.
What sort of audit report do I issue?
Thank you so much!
Hi Sam
Possibly the Greek property is in the member's name as you cannot put the title in the name of an Australian company. This would need to be reviewed to see if this is the case. Further why was the property only put in 1 name if there are 2 directors if there is no ability to have it in name of the trustee company.
The audit report you should issue is a Part A qualification on the basis that you have not been able to verify the existence of an asset.
The qualification could say:
"Basis for Qualified Opinion
The Fund Trustee has invested in a foreign property which is disclosed in Note X of
the Notes to the Financial Statements. I have received insufficient documentation
regarding the existence of this investment, therefore I provide no opinion on the existence and
the market value of this investment."
In relation to the non receipt of rent you would need to ascertain why no rental is being received. If the property is not being rented out so the members can use the property there would be Part B qualifications re sections:
Section 62 - sole purpose test
Section 65 - financial assistance to a member
Section 109 - income from an asset not received on an arm's length basis
If the property should have been owned in the company name you would have a breach of:
Regulation 4.09A - "The assets of the SMSF must be held separately from any assets held by the
trustee personally".
If you have been unable to verify the existence of the property you may consider qualifying re:
Regulation 8.02B - "When preparing accounts and statements required by subsection 35B(1) of SISA,
an asset must be valued at its market value".
If other forum members have a view as to the audit report that would be issued please let the forum know.
Thanks
The Auditors Institute