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Umesh Manek

Sep 01, 2022

Validity of Contact and Audit Approach

in SMSF Technical Forum

I am auditing the superfund, please find below the summary for easy reference:

Contract of Sale for the purchase of property signed by members in personal name on 24 June 2020.

Super fund established on 26 June 2020 (post contract of sale).

Deposit money paid by the members has been accounted for as NCC on 1 July 2020 by the superfund as super fund has lodged return not necessary for FY2020.

Bare Trust and Bare Trustee established on 14 October 2020.

Propety settleled on 17 February 2021 by Bare Trustee.

While we questioned the validity of the contract, Trustees advised that the nomination clause in the contract of sale allows Members to nominate anyone/substitue, in this case is Bare Trustee.

What should be our audit approach, considering the superfund and Bare Trustee were not in place when the contact of sale was executed ?

Will appreciate your guidance here.

4 answers0 replies

Comments (4)

Eric Taylor

Sep 14, 2022

I generally agree with the answer supplied. As the bare trust & trustee did not exist until October, it could not acquire the property in June. Subject to legal advice (and I am not a lawyer), the situation here may be the purchase by the individual in June, then sale to the bare trust in October. In addition to double stamp duty, the purchase of the property from an associate is a major issue.

Trustee needs to seek legal advice.