.png)
It is a criteria that ALL the super fund investments are in the name of the trustee.
What if there was a supporting declaration of trust for other parties (not the trustee) to hold the super fund assets.
This totally goes against the principles of the trustee ownership.
Eg all the members could have trust declarations for them to hold some of the assets!!! In a SMSF you could be faced with 4 members & 1 trustee holding assets.
My query is - if ANY party other than the nominated trustee is holding super fund assets – as auditor I am obliged to lodge an Auditors contravention notice – even if that party can show me a duly signed declaration of trust in favour of the trustee for the super fund? DO you Agree?
I heard it mentioned in a recent SMSFAAA webinar that some crypto currency’s may only allow individuals – and it there is a corporate trustee to the super fund -I believe a auditor contravention report should be issued – do you agree?
I have a similar case. As an extension to the discussion above, if an unrelated third party was holding assets on behalf of the superannuation fund, would that not be a custodian arrangement? If so, is a custodian subject to other regulatory requirements that would then satisfy Reg 4.09A?
Hi Peter
Regulation 4.09A separation of assets is a reportable regulation for the ACR, refer:
The ATO has provided guidance to auditors re this regulation and have advised:
"where State law prevents ownership in the SMSF’s name, checking for alternative documentation that protects the fund’s assets (for example, a valid declaration of trust)".
Refer:
This supports that a declaration of trust can be used in appropriate situations and this would not lead to a breach of SIS & also not be required to be reported in the ACR. That is an asset may not be in the trustee's name and if the auditor is of the view that alternative documentation protects the Fund's assets then an ACR would not be required.
Unfortunately it is a case by case review and the auditor will have to follow the ACR instructions & use their professional judgement as to whether a section / regulation has been breached & needs to be reported in the ACR.
Thanks
SMSF AAA
Hi SMSFAAA Guru
My review is that in relation to separation of assets and holding assets in the correct trustee's name NO financial threshold applies:
ATO website you suggested does not mention separation of assets ;
SO DO YOU AGREE THAT EVERY TIME AN ASSET IS NOT IN THE TRUSTEES NAME A CONTRAVENTION REPORT IS REQUIRED IRRESPECTIVE OF % SIZE OR VALUE - AND THAT A SEPARATE DECLARATION OF TRUST BY A PARTY MAKES NO DIFFERENCE - AND A CONTRAVENTION REPORT IS STILL REQUIRED?
I WISH TO MAKE IT "BLACK & WHITE"!!
COULD YOU PLESAE COMMENT ON THE THIS?
(copied from the ATo webstie)
Test 6: Financial threshold test
Where the value of all contraventions is more the 5% of the value of the fund's total assets, identified contraventions are reported as per the sections and regulations in tables 1A and 1B.
Any additional information needs to be reported in accordance with auditing and assurance standards and your professional judgement.
If this does not apply, go to test 7.
Example
An SMSF has $250,000 in total assets, including an asset acquired through a related party for $25,000. This acquisition contravened section 66 because the asset was not one of the exceptions from the general prohibition on acquiring assets from a related party. The value of the contravention is 10% of the value of the fund’s total assets. The contravention must be reported because it is greater than 5% of the fund's total assets.
End of example
In relation to test 6, if section 83 in-house assets (prohibition on further acquisition) is contravened, then the contravention value is the amount over the statutory 5% limit. For example, if the market value ratio of a fund's in-house assets is 7%, then the contravention value is 2% of the fund's assets (7% minus 5% limit), so the contravention value is not greater than 5% of the value of the fund's total assets.
Test 7: Financial threshold test
If the value of all contraventions is more than $30,000, all identified contraventions are reported as per the sections and regulations listed in tables 1A and 1B.
Any additional information needs to be reported in accordance with the auditing and assurance standards and your professional judgement.
Hi Peter
Yes the auditor report signs off in relation to regulation 4.09A which covers "separation of assets". That is assets must be documented as being held by the trustees on behalf of the Fund.
An Auditor Contravention Report needs to be lodged if it has met the reporting criteria found in the below link. If the value of the asset or assets in question, that are not in the correct name, exceeds the financial threshold tests then an ACR is required to be lodged.
If there was a reason as to why the asset was being held a certain way (not in the name of the trustee / Fund) in relation to its ownership then then any mitigating factors should be included in the ACR. This would cover your cryptocurrency example.
Thanks
SMSFAAA