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Umesh Manek

Jul 10, 2023

Disqualified Trustees

in SMSF Technical Forum

Hi Team

I have received an audit for FY2022 and noticed that bot the director of the corporate trustee have been disqualified by the ATO.

What will be our audit approach as the financials, engagement letter and representation letters all have been signed by those disqualified directors.

Thank you.

3 comments

Comments (3)

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THE AUDITORS INSTITUTE

Jul 10, 2023

Hi Umesh

A disqualified trustee cannot act as trustee of the SMSF so normally would not be able to sign the financial statements or any other documents as a trustee of the Fund.

Under section 126D disqualified trustees can request that the ATO waive the disqualification.

Depending on the reason they were disqualified they may need legal assistance to resolve this issue.

Can you please advise on what basis they were disqualified & then I can comment further.

Thanks

THE AUDITORS INSTITUTE

Umesh Manek

Jul 10, 2023

Replying to

Thank you for early reponse.

The disqualification is due to mutiple breaches for number of years. In summary Members withdrew more than 90% of fund's asset without meeting condition of relase. We lodged ACR from 2017 to 2021.

THE AUDITORS INSTITUTE

Jul 10, 2023

Replying to

Hi Umesh

I have not been involved with a disqualified trustee other than in relation to a bankrupt member.

SIS section 126K states that a disqualified person cannot act as trustee so in my view they cannot sign the accounts / audit documents as a trustee.

I would suggest the ex trustees get legal advice re their options. They may be able to convert the SMSF to a small APRA Fund where a professional trustee is appointed.

The audit report is to the SMSF trustees so I cannot see how you issue an audit report until this issue is resolved.

If other forum members have a view please let the forum know.

Of note about 700 trustees were disqualified by the ATO in 2022/23 (588 to 31/3/23) compared to 251 in 2021/22.

Thanks

THE AUDITORS INSTITUTE