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I am auditing a fund whose trustees claim the bank made an error and put their family trust name on the SMSF bank account in error, instead of the SMSF name.
The accountant is claiming this is not really a breach because the trustees did not cause it and it has now been rectified by the bank (it had not been rectified at the end of the financial year, and I still have no proof that it has been as yet).
Technically, no fund assets have been mixed, its just a wrong account name. All the funds assets are now in that account, so the amount is material.
Is a qualification and ML point sufficient or is a contravention necessary?
The same trustees had a collectible which was sold before the year end. I don't believe insurance was held nor had storage been addressed (although the accountant tells me it was stored at their business premises).
I have created a rep letter to address these issues (storage, display), requested minutes and will also address it in the management letter.
Is it also required that I lodge and ACR regarding lack of insurance if the asset is no longer held by the fund?
I know there was a contravention last year, but have no idea what the details are as the the former accountant has not responded and the trustees claim they have no details either.
Thanks for the help 😀
Hello, similar situation to the above but this question is relevant on its own. Given there are a few threads on assets and trustees in these forums if seeing a pattern of answers centering on SMSF Assets merely needing to be kept separate to avoid a R4.09A breach - But id like to know if there are any breaches/issues you can identify if say hypothetically the fund structure is 'ABC Pty Ltd ATF Alphabet Super Fund' but assets (say the Bank or Listed Shares) are held not personally, but INSTEAD is worded e.g 'ABC Pty Ltd ATF Numerical Super Fund' (Same Trustee but different fund name). What would this breach? Is it reportable?
We cannot say its a breach of SIS r4.09A/S52(B)(2)(d) because it is in fact, separate from trustees personally. Given all the various scenarios an asset could be held or designated to be held under - im wondering what approach you would take if the trustees are saying / declaring that the Bank / Listed Shares are still in fact, an asset of the Alphabet Super Fund. I also see from time to time the following 1. ABC Pty Ltd <ASF> (Abbreviated Fund names in the account designation); 2. ABC Pty Ltd <Super> (no mention of the fund name, just that it is for super). 3. ABC Pty Ltd <Alphabet Super Fund No2> (Fund name is mentioned but its the second account).
I always prepare a Audit Contravention notice when not in the correct trustees names - you will need to sight rectification for the ACR. Collectables too no insurance add to the ACR.
Thanks so much. Very helpful as usual.
Hi Clare
Re the bank account the relevant section / regulation of SIS is regulation 4.09A that (per the audit report):
"the assets of the SMSF must be held separately from any assets held by the trustee personally or by a standard employer sponsor or an associate of the standard employer sponsor".
My view is if you can see proof that the name of the bank account has been corrected to be in the Fund's name there is no reason to raise a qualification or lodge an audit contravention report (ACR). You should still raise it as a management letter issue.
The collectible rules are as per regulation 13.18AA of SIS. These regulations include the requirements that a collectible:
1) cannot be stored at a private residence,
2) written record to be kept re storage decision,
2) it must be insured in the name of the Fund,
3) it cannot be used by a related party, and
4) if sold to a related party a valuer is required to value the asset.
My view is that it would be a breach of SIS re the insurance if no insurance was held even though the property has been sold at year end. If it was reported in the ACR in the prior year my view is it should be reported again and you can explain to the ATO (via the ACR) that the asset has now been sold.
Please also follow the ACR instructions re the breach & the reporting of them.
Thanks
SMSF AAA