Small Contraventions that can cause large SMSF compliance problems
There are a couple of small audit contraventions, that can easily and unknowingly occur, that can cause BIG headaches:
1. Not getting back to the auditor on time S.35C(2)
Trustees must ensure that requested relevant documents are given to the auditor within 14 days of the request being made. S.35C(2) is one of the regulatory requirements which includes a statutory time. If the contravention is a breach of a statutory time by more than 14 days, then the contravention must be reported. In other words, it is a reportable breach if it takes a trustee more than 28 days to provide documents requested by the auditor.
So, when we are requesting documents off you, please respond in a timely manner.
2. Bank overdraft S.67
Generally, SMSFs are prohibited from borrowing money. There are only limited circumstances in which SMSFs can borrow money, such as when borrowing to settle securities (where borrowing is less than 7 days and 10% of the value of the fund’s assets) and borrowing to pay beneficiaries (where the borrowing is for less than 90 days and 10% of the value of the fund’s assets).
When the balance of an SMSF’s transaction bank account is running low, the bank account may go into overdraft.
Regardless of the amount of overdraft, the contravention rules still apply. If the amount is small, it is not reportable in the first year, but if the bank account is overdrawn for two years in a row, it must be reported to the ATO.
Steps for Trustees:
- Please reply to our auditor queries within 14 days of us requesting information; and
- Please ensure that there is sufficient funds within the SMSF bank account for all expenses or transfers.
