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Stephen Chiang

Aug 29, 2022

UPE from a pre 1999 unit trust

in SMSF Technical Forum

I am auditing a fund which has all its investment in a pre 1999 unit trust, which in turn has all its investment in a managed fund platform. The fund has an asset UPE which flows through from a couple of years prior. The amount is about $52k with the fund having a gross asset of $1.6m. So it is less than 5% and more than $30k. This issue has not been reported in prior year management letter.

Given that the unit trust is exempt from being an IHA, does that mean that any UPE, regardless of it being more than 5% and/or the $30k threshold, will not be caught in the IHA rules?

How do the 5% interact with the $30k?

If the total contravention is more than 5% and yet below $30k, does this fit in with the reporting criteria, and vise versa, or is it either or?

Many thanks

3 answers0 replies

Comments (3)

Stephen Chiang

Aug 30, 2022

Thanks for your reply.

In my audit case where the amount of breach is $52k and therefore reportable. Yet the amount is less than 5% of the gross asset of the fund, not reportable.

Apart from mentioning it in the management letter, do I exercise professional judgement and make a decision as to the reporting on ACR?

THE AUDITORS INSTITUTE

Aug 30, 2022

Replying to

Hi Stephen

If the breaches are more than $30,000 you have to report it in the ACR (even if they are less than 5% of the Fund's assets).

You have to work through each test & as per the ATO's ACR instructions:

"Test 7: Financial threshold test

If the value of all contraventions of a section or regulation listed in tables 1A and 1B is more than $30,000, all identified contraventions are reported.

Any additional information needs to be reported in accordance with the auditing and assurance standards and your professional judgment."

Thanks

SMSF AAA