The Australian Taxation Office (ATO) has issued a new set of instructions to assist auditors in determining when to file a contravention report for a self managed superannuation fund (SMSF) including the definition of certain tolerance levels.
"It's a bit of a different approach from what we've seen from the ATO in the past. A couple of years ago auditors were saying every time the superannuation fund gets indigestion I've got to report it to the ATO," SuperConcepts technical manager Graeme Colley said.
"So in the first year they ended up with thousands of contravention reports of poor quality."
The main difference this time is the inclusion of materiality thresholds from an asset value perspective as well as a timing one, according to Colley.
In regard to the financial threshold, contraventions now only need to be reported if they represent 5 per cent or more of the value of the SMSF's assets or if they are over $30,000.
From a timing perspective a trustee has a 14-day window of opportunity to correct any oversights or errors detected before a contravention report would need to be filed.
In addition, the new ATO instruction has also provided auditors a list of reportable contraventions. This covers events such as the acquisition of assets from related parties, keeping of records and minutes, investments not maintained at an arms length, and borrowing by the fund.
"It's very handy because it may have been that auditors were reporting incorrect breaches or incorrectly reporting to the ATO when there was no requirement to report," Colley said.
