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Members are 76 years old and contributed to SMSF in Sep 19 downsizer contributions of $600,000 but they took out $595,000 from SMSF. SMSF Tax return prepared audited and lodged on that basis).
On 05/09/20 they did in specie transfer of their own share portfolio for the amount of $595,000 (as per journal entry provided by accountants). Initially accountants say that it was mistake but now they have produced the copy of amended tax return and amended financials and have created journal entries.
Mind it most of the SMSF funds are invested in accountants own trust.
Can they do this and what are our obligations regarding that as auditor.
Hi Rakesh
Thanks, my view based on what I understand has occurred is that the Fund's 2019/20 accounts should show the listed shares purchased on 25/6/2020 for $595,000.
SIS section 66 has to be followed in that they have to be acquired / purchased at market value. That is you need to audit the price at which they were sold to the Fund.
It is not unusual for shares to take time to be transferred from one owner to another. I would request a statement that the shares has been transferred on 25/6/2020 & request a copy of the transfer paperwork to support that.
You could consider requesting a copy (or an extract) of their personal 2019/20 ITR's to support that the shares have been sold to the Fund as at 25/6/2020. If the member's have a tax agent re their personal ITR's you would also expect that the sale details will appear on their "prefill report" for the 2019/20 year.
Thanks
SMSF AAA
Hi Rakesh
I am not sure if I follow the question.
I assume in 2019/20 the Fund received $600,000 in downsizer contributions.
On 5/9/2020 they transferred $595,000 of personal shares to their Fund and the Fund paid them for the shares.
The questions I have to be able to respond are:
At what date was the $595,000 paid from the Fund to the members?
At what date was the disposal of shares reflected in the member's personal tax returns?
At what date did the share registries reflect the transfer of shares?
At what date did the Fund's accounts reflect the purchase of the shares from the member's?
If they are 75 or older there is no ability to make non-concessional contributions but the Fund can purchase listed shares from a member(s) at market value.
In relation to investment in the accountants own trust I would need further details to comment.
Thanks
SMSF AAA