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Could you please guide me what documents all require for audit SMSF investment in the private related / unrelated company (more than 5%)?
There is no dividend to that SMSF over 3 years due to the company do not have profits, I am wondering whether any issue for audit
Many thanks
The distinction between an investment in a related party and an unrelated party private company is very significant.
An SMSF can potentially invest in a related private company, but the investment is likely to be required to meet the strict requirements of Regulations 13.22C and 13.22D to avoid being treated as an in-house asset under section 71(1) of the SIS Act.
Whilst not an exhaustive list, documents to consider as part of SMSF audit where there is an investment in a private company are:
the signed financial statements of the private company (whether audited or not)
any documentation provided by the trustee of the super fund (through their accountant) advising as to the basis on which the shares were valued as at 30 June
any independent reports as to the value of the shares
the price at which any recent sales of shares in the private company took place at.
A risk in the situation you have described is if the shares in the private company are valued at their historical cost in the SMSF's balance sheet. The trustee of the fund (through their accountant) has to have some basis for valuing the shares. This basis needs to be capable of being reviewed and tested by the auditor.