As is with business tax audits, the ATO can also launch an investigation audit on your SMSFs either randomly or in the case it believes you’ve made some error in your fund management.
Should this happen, you have to burden the administration and accounting fees involved with the audit. It can cost thousands of dollars and can significantly impact your super balance.
Audit protection insurance can help you alleviate concerns over potential cost of a random audit. Not only does it cover your fund against the cost of compliance, it also covers for any penalties you have to pay if errors were found during the audit.
As the number of SMSFs in Australia continues to grow, so too are the number of audits conducted by the ATO. The truth is, you can have sound accounting practice on your super and the ATO can still subject you to a random audit. However, it seems like high-value funds, those with assets of over $1M, are more likely to be subjected to an audit. Here some other factors that can increase the chances of being audited.
- Any indication of related-party transactions, where the ATO may suspect the personal use of the SMSF's assets by fund members
- Large or excess contributions to the fund
- A lodgement delay or apparent error in your SMSF's annual return
- Delay or failure to pay your SMSF's tax assessment
- Any qualifications in the annual report of your SMSF's independent auditors
An audit is a time consuming process even if you have the most orderly of records and documentations. The auditors would have to check each and every detail of your administration, legal structure, decision-making process and investment strategy. Any breaches discovered by the Tax Office can cause severe fines not only for the fund, but also the Trustees.
With audit insurance, you can have peace of mind and security. Such insurance cover will ensure you are covered for both Tax and SMSF audits. Please contact your adviser today on 07 5413 9300 if you have any questions in relation to your SMSF or Audit Insurance.