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Suzanne Sloan

Oct 29, 2021

No lease agreements for rental deposits

in SMSF Technical Forum

I am auditing a fund that has no lease agreements in place for the fund's residential property. The Trustees say the tenants are short term and the property is let on a per room basis and the SF gets a better return on its investment by letting the property out per room. I can see lots of deposits into the bank account from different sources (and some are just annotated "rent" and there are also some that are just cash deposits)... there are also deposits from 1 source that are made regularly for more than 8 months. The trustees are reluctant to put lease agreements (even short term/per room ones) in place because they don't want the hassle... They manage the rental property themselves.

My view is that i need to insist on them putting short-term per room lease agreements in place so that i can check the deposits against the lease agreements to ensure all rent due has been deposited or note if there are arrears or if there are any deposits that are not actually rent.

How do i deal with this from an auditor perspective? Should i lodge an ACR for this issue? I think i should also include it in the Management Letter and qualify the audit report... do you agree?

Many many thanks

Suzanne

3 answers0 replies

Comments (3)

Stephen Chiang

Nov 01, 2022

On further reading of this case, is the fund exposed to NALI/NALE if the trustee of the SMSF manages a residential property himself, without engaging a licensed property manager? The trustee has to pay the council rates, arrange insurance, co-ordinate with the tenant and repairers etc. This is merely a cost saving strategy.