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What would be considerd to be appropriate audit evidence for confirming a SMSF has been charged market rates for a service performed by a related party? eg an electrician performs electrical repairs. Would a detailed itemised invoice setting out the exact work done, hours spent and rates charged to the SMSF be sufficient?
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Hello Lacey
In the scenario you refer to, the fund auditor is seeking to obtain evidence that services provided by the related party electrician and invoiced and paid for by the SMSF, did not give rise to the application of section 290-550(1) of the Income Tax Assessment Act 1997 (the non-arm's length income rules - in particular, in relation to a potential non-arm's length expense matter).
In addition to the detailed itemised invoice you have described, consider also obtaining an invoice issued to an unrelated 3rd party client at or about the same time the work was provided to the SMSF, to ascertain that the hourly rate charged to the SMSF is the same as the hourly rate charged to an unrelated third party.
Thanks
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