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What are the responsibilities of the auditor where the smsf is late in lodging its previous year annual return? Besides including the matter in the Management report, should the audit report be qualified and/or a contravention report be lodged? What are the other consequences for non-compliance?
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Failing to lodge a tax return in the prescribed period is a breach of Section 35D. As per SMSF AA response this is not a reportable contravention. Section 35D provides a penalty of 25 penalty units with a maximum of 50 penalty units per offence. The cost of a penalty unit is currently $222 but is stated to increase to $275 on the 1st January 2023 in the budget. I note 25 Penalty units = $5,500. In my experience the ATO rarely apply this penalty but it is available to them.
Hi Brian
In terms of the sections and regulations that the auditor signs off on an annual basis arguably there is no section or regulation that the auditor is signing off on in relation to a late annual return. On that basis normally an auditor does not qualify an audit report or lodge an ACR re a late annual return. I agree it should be raised in the management letter.
In terms of the audit report relevant sections of SIS are:
Section 35B - The trustees must prepare, sign and retain accounts and statements.
Section 35C(2) - The trustees must provide the auditor with the necessary documents to complete the audit in a timely and professional manner; and within 14 days of a written request from the auditor.
Normally a Fund that is late in lodging an annual return has its "regulation" details removed by the ATO so it is not able to receive rollovers and employers cannot make superannuation guarantee contributions to the Fund.
If a Fund is made non-complying by the ATO its assets and income can be taxed at the highest marginal rate.
Thanks
SMSF AAA