Hi

Section 52B(2)(d) of SIS & SIS Regulation 4.09A both require that trustees keep assets of the Fund seperate from personal assets. It is Regulation 4.09A that the auditor signs off on in their audit report.

Re asset ownership Regulation 4.09A of SIS requires that:

"A trustee of a regulated superannuation fund that is a self managed superannuation fund must keep the money and other assets of the fund separate from any money and assets, respectively:

(a) that are held by the trustee personally; or

(b) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund."

Arguably if the investments are in the name of individual trustees in trust for the Fund it is technically not a breach of Regulation 4.09A as the assets are kept separate from any personal assets (as long as the asset is in the name of the Fund). I agree that the shares should have been transferred to the new corporate trustee in trust for the Fund.

My approach would be to communicate directly with the directors of the trustee company in writing re your concerns and request a response within 14 days. If no response is received I would consider qualifying the audit report (& lodging an Auditor Contravention Report) re section 35C(2) of SIS that requires:

"The trustees must provide the auditor with the necessary documents to complete the audit in a timely and professional manner; and within 14 days of a written request from the auditor."

In relation to the shares not being correctly transferred from the Fund as part of a dearth benefit payment to the wife I would consider qualifying the audit report (& lodging an Auditor Contravention Report) re SIS Regulation 6.17 that requires:

"Payments of member benefits must be made in accordance with Part 6 or Part 7A of the regulations and be permitted by the trust deed".

Based on what you have advised there may be a breach of SIS Regulation 6.21 that requires that:

"a member's benefits in a regulated superannuation fund must be cashed as soon as practicable after the member dies."

Thanks

THE AUDITORS INSTITUTE

Thank you for your prompt helpful and supportive response. I just need to make clear that the retired (widow) members account reports an "in specie transfer -share " -not a death just a lump sum benefit as part of winding it up. The member is the sole director of the Trustee Company and has signed a declaration that on 30 June 2022 an in specie share transfer to me has been recorded at a share market value of $ xxxxxx for the purposes of the proposed wind up of the ...SMSF." The parcel of shares were never successfully transferred from the individual trustees to the corporate trustee but as said the last dividend statements show they are SMSF assets. (with late xyz and Mrs as trustees) I m quite concerned that according to the Accountant dividends were received in the 2023 year (and continue to be paid the SMSF bank account) despite this declaration and are proposed to be presented as "drawings or benefit payments " in the potentiallly final FS for 2023. The Accountant proposes to close the bank accounts so that dividends are no longer received but obviously ATO will still have the SMSF on record so even if the member declares the dividends personally there is an ongoing issue. What happens when the member passes away ? The problem will compound and a beneficiary could query why the matter was not resolved. I believe an auditor could be held to be negligent in not drawing attention to the absence of evidence of the transfer to the member. Even if the Corporate Trustee makes an assurance that the transfers have been or will be performed, 52 B 2 d still appears to be an issue. Should the Accountant/Tax Agent amend the FS and TR22 to keep the parcel of shares as an asset and keep the SMSF running until or unless the transfers are effected ? OR could an auditor accept an assurance/declaration by the Trustee/member that they have taken steps to transfer the shares from the Late Mr and Mrs as Trustees for XYZ SMSF to the Corporate Trustee for the SMSF and THEN to the name of the personal member ? -- It may never happen ! The Accountant prefers not to amernd the FS 22 obviously. Thank you for your view and guidance !

Hi

Thanks, given your concerns these should be put in writing to the Trustee and you should request a written response acknowleding your concerns. If a genuine attempt was made to transfer the shares my view would be that the financial statements do not have to be amended (and also as the accountant does not want to amend the financial statements). It is hard for me to comment in that I do not know the exact reason that has delayed the transfer of the shares.

An approach could be to raise a Part A financial qualification re the shares not being correctly transferred and to raise a Part B compliance qualification re Regulation 4.09A re separation of assets (noting what I advised in my first response). You could lodge an ACR and explain your concerns and advise the ATO what the Trustee is doing to rectify the issues.

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

Thanks

THE AUDITORS INSTITUTE

Thanks a lot