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Hi
R8.02B requires "an asset must be valued at its market value"
However, as an SMSF auditor, we are required to perform our audits in compliance with the auditing standards. This includes the rules regarding sufficient evidence. (e.g ASA 500)
As such, our audit requirements, for this section, are higher than required in the SIS legislation and can be stated "an asset must be valued at its market value, with sufficent evidence to meet australian audtiing standards.
It is entirely possible that a fund can value it's asset at market value (and pass R8.02b) but is not able to meet our higher standard.
Where the fund cannot meet our standard, we are required to qualify the audit and complete an ACR. (I note the ACR threshold tests don't matter as we don't have sufficent evidence to prove the asset market value and therefore cannot determine the size of the breach is below the $30,000 limit)
In my experience, the ATO is taking these ACR's and writing to the trustee's, (perhaps on an automatic system-generated letter basis) stating they have unrectified contraventions. If the same valuation issue occurs over two or more years the ATO is writing to the trustee's stating their compliance history is unsatisfactory.
As per the above, these letters are not strictly correct.
In my opinion, where the only issue is a R8.02B, the ATO should have a different automatic letter, which states the issue and outlines the valuation requirements and that the auditor has been unable to confirm the assets are at market value. It should state the trustees will be required to prove market value in the event of an ATO audit.
Other auditors' thoughts?
Hi Toby
Thanks & agree with your views. It arguably is difficult for the ATO to actively follow up trustees / SMSF's where there has been a breach of SIS reported by the auditor via an Auditor Contravention Report (ACR) given the large number of breaches reported.
Per the ATO they advised (re the 2021/22 year):
"The number of auditor contravention reports (ACRs) reported by approved SMSF auditors was 2.8% of the total number of lodging SMSFs .
In 2021–22, ACRs were lodged for 13,600 SMSFs, reporting 40,000 contraventions. Just under half (46%) of all contraventions were reported as rectified.
The most commonly reported contraventions continued to be loans or financial assistance to members (20%), in-house assets (17%) and separation of assets (13%). "
Also refer below from the ATO re types of breaches reported via ACR's:
The above table suggests assets not being recorded at market value is not a common breach.
I have seen the standard ATO letter re contraventions but not the letter that states the trustees / SMSF's "compliance history is unsatisfactory". Has the ATO in these examples taken further action against the trustees and or the SMSF?
Thanks
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