Hi Campbell

I agree that the term deposits are not held in the way that the ATO expects them to be as per there example for a corporate trustee as noted above being "R Smith Pty Ltd as trustee for the Smith SMSF". However, Regulation 4.09A of SIS requires that assets are to be kept separate from:

a) money held by the trustee personally, or

b) money of a standard employer-sponsor or an associate (of an employer-sponsor).

That is as the term deposit is in the name of the Fund there is an argument that it is being kept separate from personal assets.

As noted above for the term deposit there should be a declaration of trust. You could also raise the issue in your management letter that the Term Deposit should refer to the trustee company as the owner in trust for the Fund.

I agree the recent Sydney "Ponzi" Scheme case highlights that we need to carefully review / audit the documentation that we are provided. It will be interesting to see how this Sydney cases play out if the auditor(s) relied on documentation that was fraudulently put together and did not verify any of the shareholdings in the portfolio reports provided.

Thanks

SMSF AAA

Thanks for your Response. Good to see we are on the same page regarding the shares as being a breach based on above and Reg 4.09A those examples clearly show the trustee name. Would it not be reasonable to think that the same should be applied to the term deposits? Further what if there were 2 funds with both the same names and different trustees. I know I am appearing difficult here, but it gets back to separation of assets and clearly being able to identify if they belong to that fund. Just putting it out there that recently we have seen a high profile Sydney financial advisor accused of a ponzi scheme. I wonder what documentation she had on the investments.

Hi Campbell

My view is that the term deposits do not need to be qualified on or reported in the audit contravention report (ACR). My understanding is that the term deposits are in the name of the Fund but do not refer to a trustee or trustees. My view is that this is not a breach of SIS section 52B(2)(d) or Regulation 4.09A as the term deposits are not held personally (as they are in the name of the Fund). I agree that the term deposits should refer to the trustee company as trustee for the Fund. This could be covered by making sure there is a declaration of trust in place.

In relation to the listed shares as they are in the name of the individual trustees (in trust for the Fund) rather than the trustee company there is a breach of Regulation 4.09A. As the total is greater than $30,000 an ACR should be lodged re the breach.

The ATO refers to regulation 4.09A & auditor's requirements at:

https://www.ato.gov.au/Super/Self-managed-super-funds/SMSF-auditors/Auditing-an-SMSF/Compliance-audit/

"The auditor should obtain evidence that the fund’s money and assets are held separately from money and assets held personally by the trustees or a standard employer-sponsor by:

• sighting asset ownership documents, including bank statements, to verify SMSF assets are held in the name of trustees on behalf of the fund (for example, R & J Smith as trustees for the Smith SMSF or R Smith Pty Ltd as trustee for the Smith SMSF) and not in the name of the trustees alone

• 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)

• reviewing transactions on bank statements to ensure fund money is not mixed with money belonging to related parties of the SMSF.

Where there has been a change in trustees, the auditor should obtain evidence that ownership documents reflect the change."

Thanks

SMSF AAA