According to the Australian Tax Office, if you are running a self managed superannuation fund (SMSF), you are required to seek an audit before you can file your SMSF annual returns. Considering that you may not have a deep financial background, you may be apprehensive about this audit and what it involves. In this article, find out exactly what your auditor will be seeking to establish when combing through your SMSF records.
Are you following the set investment plan?
As you well know, part of setting up a self managed super fund entails coming up with a plan on how to manage and invest your retirement funds. Your SMSF auditor will be seeking to establish that you are indeed following this plan. This includes verifying the trustees running the fund (you or other trustees appointed by you). They will also check that you are making investments in the categories drawn in your SMSF strategy, e.g. real estate, antiques, shares, etc.
Have you been keeping records?
Part of an auditor's main role is verifying financial reports. Your SMSF auditor will therefore go through your financial records for the past year and ascertain that you are indeed keeping correct records as expected of you. This includes records of transactions, assets purchase and ownership, tax payments, insurance payments, administrative costs, etc. Such records will not only show that your fund has been active, but it will also help to show whether you have been complying with the requirements of running your own super fund.
Are you on track to reach your retirement super goals?
After examining your records, your auditor will also assess whether you are on track to reaching your super fund's annual goals. That is, have you made good or bad investment decisions in the last year? This will be evaluated by assessing your assets and investments compared to your financial position a year ago. In case your super fund has not performed well, the audit will indirectly help you to recognize this trend and perhaps make amends in the next year.
Is the super fund money being used for retirement only?
Last but not least, the auditor will check whether you have used your SMSF money for investment purposes only. As you know, money from the fund should only be used for investments and administrative costs. By checking your financial records, your auditor will determine if there are any funds that were not used for the above applications, and why.
Once the audit is done, your SMSF auditor will brief you on their findings before proceeding to file a report with the Australian Tax Office.