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Sze Wai Yu

May 03, 2021

Lack of Records

in SMSF Technical Forum

Hi,

The fund has a number of unlisted investments (i.e. the market values as at 30 June 2020 was nil) which cannot provide any supporting documents; The trustee has provided us a declaration confirming the holdings and also market values (Nil) - Do we need to qualify? The cost of one of the unlisted investment was $700k which was over 50% of net asset.
The members are over 75 from 1 July 2020 so they cannot accept any contributions; The fund has no money left in the bank except for some listed shares - Do we consider the insolvency issue?
The member had accidentally deposited the sale proceed of the property held in their own name into the fund's bank account and withdrew in a number of transactions throughout the year; The remaining balances was then be treated as non-concessional contributions; A trustee declaration was provided that the contribution was a mistake; Can we accept this? or if we need to report to ATO?

Thanks in Advance

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

May 04, 2021

Hi Sze

Re your queries:

If no supporting documents for unlisted investments (and if material) you would need to qualify Part A of the audit report re the financial report. If you have been unable to get audit evidence to support the market value of the unlisted investments (and if material) then you would also need to qualify Part B of the audit report re the compliance report. The SIS regulation that would be in breach is Reg 8.02B that states when preparing financial statements an asset must be valued at its market value. Given the values involved you would also need to lodge an audit contravention report (ACR) re the breach.
Normally a SMSF does not have an insolvency issue in that a member's balance is normally represented by the value of the Fund's assets and the member's shares of those assets. If they were for example paying an account based pension and had no cash to pay the minimum pension required the trustees may need to commute the pension accounts back to accumulation mode.
If the Fund had received contributions and the members were not able to make them then this would be a breach of regulation 7.04 of SIS. If contributions are made in error regulation 7.04 of SIS requires that the "fund must return the amount to the entity or person that paid the amount within 30 days of becoming aware that the amount was received". The amount involved will determine if Part B of the audit report needs to be qualified and whether an audit contravention report needs to be lodged with the ATO. I note that often accountants treat amounts that were deposited in error as a creditor rather than as a contribution.

Thanks

SMSF AAA