{"id":5307,"date":"2020-11-10T11:46:27","date_gmt":"2020-11-10T00:46:27","guid":{"rendered":"https:\/\/mnygroup.wpengine.com\/?p=5307"},"modified":"2025-02-01T18:33:54","modified_gmt":"2025-02-01T07:33:54","slug":"tax-and-smsf-audits-on-still-on-atos-radar","status":"publish","type":"post","link":"https:\/\/mnygroup.com.au\/en\/tax-and-smsf-audits-on-still-on-atos-radar\/","title":{"rendered":"Both Tax and SMSF Audits on Still on ATO\u2019s Radar, But Some Leniency Given"},"content":{"rendered":"<p><span style=\"color: #000000;\"><nav aria-label=\"breadcrumbs\" class=\"rank-math-breadcrumb\"><p><span class=\"last\">Home<\/span><\/p><\/nav><\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-5308 alignright\" src=\"https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/01\/Both-Tax-and-SMSF-Audits-on-Still-on-ATOs-Radar-But-Some-Leniency-Given-300x167.jpg\" alt=\"Both Tax and SMSF Audits on Still on ATO\u2019s Radar, But Some Leniency Given\" width=\"300\" height=\"167\" srcset=\"https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/01\/Both-Tax-and-SMSF-Audits-on-Still-on-ATOs-Radar-But-Some-Leniency-Given-300x167.jpg 300w, https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/01\/Both-Tax-and-SMSF-Audits-on-Still-on-ATOs-Radar-But-Some-Leniency-Given-768x428.jpg 768w, https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/01\/Both-Tax-and-SMSF-Audits-on-Still-on-ATOs-Radar-But-Some-Leniency-Given.jpg 960w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/p>\n<blockquote><p>While the ATO has lately been focusing on the rollout of stimulus measures, it has also flagged that audit work is not off the table completely.<\/p><\/blockquote>\n<p><span style=\"color: #000000;\">In late July, when the ATO fronted a parliamentary Senate Select Committee on COVID-19, its representative said plans were to start tax audits sometime between September and October 2020. Time and efforts however were diverted to the rollout of the JobKeeper scheme and other stimulus measures, with the ATO sourcing staff for this work by redeploying people from initiating audits, saying it had been a \u201cconscious choice\u201d not to initiate new audits during the peak of the pandemic.<\/span><\/p>\n<p><span style=\"color: #000000;\">But that, as they say in the classics, was then \u2014 and this is now. The takeaway for everyone is that audits will not go away, and will come at some point, so taxpayers and SMSF trustees need to have their affairs in order.<\/span><\/p>\n<p><span style=\"color: #000000;\">It may therefore be worth recapping some of the main triggers for tax audits, which includes:<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\">falling outside the ATO\u2019s small business benchmarks<\/span><\/li>\n<li><span style=\"color: #000000;\">discrepancies between tax return income, and the income declared throughout the year on activity statements<\/span><\/li>\n<li><span style=\"color: #000000;\">failing to lodge activity statements or returns on time<\/span><\/li>\n<li><span style=\"color: #000000;\">underpayment of superannuation guarantee<\/span><\/li>\n<li><span style=\"color: #000000;\">lifestyle assets not matching income<\/span><\/li>\n<li><span style=\"color: #000000;\">business vehicles, but no FBT return is lodged, and<\/span><\/li>\n<li><span style=\"color: #000000;\">consistently showing operating losses.<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #000000;\">For the SMSF sector, \u201creciprocal\u201d SMSF auditing (where two auditors agree to audit each other\u2019s funds) are expected to be an ATO focus when auditing gets back into full swing.\u00a0<\/span><\/p>\n<p><span style=\"color: #000000;\">In January 2020, the Australian Professional Ethical Standards Board (the body that oversees and issues standards that SMSF professionals should comply with) released guidelines regarding independence. These guidelines specifically spelled out a potential new direction regarding the independence standards expected for SMSF auditing practices. The guidelines state that an auditor cannot audit an SMSF where the auditor, their staff or firm has prepared its financial statements, unless it is a \u201croutine or mechanical service\u201d.<\/span><\/p>\n<p><span style=\"color: #000000;\">For firms that provide both accounting and <strong>auditing services, it may come down to many firms making a choice between providing one service or the other. The thing to be aware of is that the ATO has already flagged that the issue is already on its radar. It has however said it is not going to \u201ccommit compliance resources\u201d until at least 2021.<\/strong><\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><span style=\"color: #000000;\">No penalties for asset valuations if insufficient evidence<\/span><\/h2>\n<p><span style=\"color: #000000;\">In the meantime, the ATO has stated that that it will not impose penalties if it is satisfied that an SMSF trustee finds it difficult to obtain the required valuation evidence for fund assets due to the impacts of COVID-19.<\/span><\/p>\n<p><span style=\"color: #000000;\">\u201cIf we are satisfied this was due to the impacts of COVID-19, the contravention will not result in penalties,\u201d the ATO says. \u201cInstead the trustee will receive a letter from us advising them to ensure they comply with our valuation guidelines and have supporting valuation evidence by the time of their next audit if possible, as repeated contraventions can lead to penalties.\u201d<\/span><\/p>\n<p><span style=\"color: #000000;\">The rules state that it is not the auditor\u2019s role to determine the market value of the fund\u2019s assets but that it is the trustee\u2019s responsibility to provide documents requested by their auditor which supports the market valuation for their assets. This is the area that is subject to ATO leniency for the COVID-19 conditions.<\/span><\/p>\n<p><span style=\"color: #000000;\">The ATO does advise however that auditors should consider the need to modify their audit report and lodge an <a href=\"https:\/\/www.ato.gov.au\/Super\/Self-managed-super-funds\/SMSF-auditors\/Reporting\/Auditor-reporting-requirements-to-ATO\/#LodginganACR\" target=\"_blank\" rel=\"noopener\">auditor\/actuary contravention report<\/a> (ACR), if necessary, during the 2020 and 2021 financial years. The ACR should include the reasons why the trustee was unable to obtain the appropriate evidence.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: center;\"><strong><a href=\"https:\/\/mnygroup.com.au\/\">www.mnygroup.com<\/a><\/strong><\/p>\n<p><span style=\"color: #999999;\"><em>This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.<\/em><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>While the ATO has lately been focusing on the rollout of stimulus measures, it has also flagged that audit work is not off the table completely.<\/p>\n","protected":false},"author":1,"featured_media":5308,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1689],"tags":[1412],"class_list":["post-5307","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-advice","tag-smsf","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-20"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/5307","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/comments?post=5307"}],"version-history":[{"count":0,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/5307\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media\/5308"}],"wp:attachment":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media?parent=5307"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/categories?post=5307"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/tags?post=5307"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}