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Self Managed Super Funds (SMSF)

Five steps to towards an easier SMSF audit

By Graeme Colley
Executive Manager, SMSF Technical and Private Wealth - SuperConcepts Sydney, Australia

SMSF auditors have taken a much greater interest in making sure the fund complies with all the superannuation rules and regulations. It is therefore important to follow some simple steps to make it easier to get everything together for the fund’s annual audit. Here are some of the things that need to be done.

Step one: Getting all the paperwork together

Maybe getting all the information together doesn’t sound like rocket science, but it’s essential. Many trustees think that getting 12 months’ paperwork together can bring on a major case of procrastination. Poor paperwork typically reflects poor record keeping — or no records at all. But on the bright side, improvement in record keeping can provide the opportunity to make things a whole lot easier. The starting point is to ask the fund’s accountant, administrator or auditor for a detailed checklist of the documents they require, then think about how they can be created, and file them right throughout the year.

TIP: If paperwork really isn’t the trustee’s strong point then maybe it’s time to find an accountant or fund administrator that can take the hard work out of record keeping for the fund.

Step two: Review the fund’s investment strategy

The fund’s auditor will check to see that the trustee has followed the fund’s investment strategy and they’ll want to see evidence that the trustees can justify the strategy, as well as having it reviewed regularly. The auditor may wish to sight the reviewed or updated investment strategy of the fund, or sight minutes of meetings so they are satisfied that the investment strategy has been reviewed. So now would be a good time to proactively review the fund’s investment strategy and make sure that it:

  • Matches the members’ evolving risk profiles;
  • Continues to provide enough liquidity for drawdowns and expenses (especially if members are moving into pension phase); and 
  • Adequately considers members’ insurance needs.

TIP: A financial adviser can help with questions about the investment strategy and insurance of an SMSF.

Step three: Check the fund’s asset values

The price and value of a fund’s investments may change dramatically from year to year — especially in today’s volatile market. It would be recommended for any fund that holds shares, real estate or similar investments to review their valuations, so they are up to date and properly documented.

TIP: Auditors are required to determine how investments in the fund’s accounts and statements have been valued. They will find out whether the value is supported by reasonable documentation and in some instances, propose if any valuations need to be undertaken by a licensed valuer.

Step four: Make sure the SMSF is following the pension rules

For any SMSFs which are paying pensions to members, the trustees should make sure they comply with the minimum pension payment rules. If the fund does not pay pensions as required by the rules, the fund could end up paying extra tax as a consequence.

TIP: The fund’s financial adviser, accountant or administrator can explain the minimum pension payment rules and help a trustee to calculate the required minimum annual pension payment from the fund to its members.

Step five: Make an early start

Remember, the audit of an SMSF must be completed before the fund’s annual compliance return is lodged with the ATO. Until that is done, the fund will not receive any tax refunds, which may include a refund for dividend imputation credits from shares that may be invested within the fund. The sooner refunds are received, the faster they can be reinvested to further build the value of the fund and the member’s retirement savings.

The bottom line

There’s nothing like deadlines to get the fund into action. To make easy work of the task, it’s better for the trustee to take the right steps so that the fund’s tax and compliance returns are lodged on time.

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Graeme Colley, Executive Manager, SMSF Technical and Private Wealth - SuperConcepts
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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.


This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

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