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How to improve SMSF audit readiness:
A guide for accountants and trustees

An efficient SMSF audit process begins with being well-prepared. Audit readiness not only ensures compliance with ATO regulations but also reduces stress, avoids delays, and builds trust between accountants, trustees, and auditors. Whether you’re an accountant helping trustees manage their SMSFs or a trustee navigating the audit process, improving audit readiness is crucial.

Here’s a comprehensive guide to enhancing your SMSF audit readiness:

1. Organise documentation early

Incomplete or disorganised documentation is one of the most common reasons for audit delays. Staying on top of record-keeping throughout the year is key.

Steps to take:

  • Maintain up-to-date records: Ensure all financial statements, investment documents, and compliance-related paperwork are updated regularly.
  • Create a checklist: Use a pre-audit checklist to verify that all required documents are accounted for (e.g., trust deeds, bank statements, investment records, and member contributions).
  • Digitise records: Store documents in a cloud-based system for easy access by auditors and accountants.

Pro tip:

Provide auditors with a clear and organised file structure, labeling documents by category (e.g., investments, contributions, expenses).

2. Ensure the investment strategy Is up to date

The ATO requires SMSFs to have a documented investment strategy that aligns with their objectives and risk profile.

Steps to take:

  • Review regularly: Update the investment strategy at least annually or whenever there’s a significant change in the fund’s investments.
  • Incorporate risk analysis: Address how risks, including diversification, liquidity, and member needs, are managed.
  • Document everything: Record trustee discussions and decisions related to the investment strategy.

Pro tip:

Include detailed commentary on unusual investments, explaining how they align with the strategy and the sole purpose test.

3. Prepare accurate and timely financial statements

Financial statements are the cornerstone of the audit process. Ensuring their accuracy is vital.

Steps to take:

  • Reconcile accounts regularly: Match bank statements, contributions, and expenses to financial records throughout the year.
  • Use SMSF software: Platforms like Class Super or BGL Simple Fund 360 can automate reconciliations and generate reports in auditor-friendly formats.
  • Address errors early: Identify and rectify discrepancies in financial records before submitting them for audit.

Pro tip:

Work closely with your accountant to ensure financial statements comply with all relevant standards.

4. Manage unusual investments carefully

Unconventional investments, such as cryptocurrency or collectables, can complicate the audit process.

Steps to take:

  • Provide independent valuations: Obtain up-to-date valuations for assets like real estate, artwork, or private company shares.
  • Document transactions thoroughly: For digital assets, maintain detailed records, including transaction histories and wallet addresses.
  • Meet specific storage and insurance requirements: For collectables, ensure compliance with ATO rules on storage and insurance.

Pro tip:

Collaborate with auditors early to confirm what documentation is required for unusual investments.

5. Maintain compliance with contribution and pension rules

Trustees must adhere to strict rules regarding contributions and pension payments.

Steps to take:

  • Track contributions: Ensure member contributions stay within ATO caps and are classified correctly (e.g., concessional vs. non-concessional).
  • Verify pension payments: Confirm minimum pension withdrawals have been met for the financial year.
  • Keep detailed records: Document all contributions and payments, including supporting evidence like payment receipts or bank statements.

Pro tip:

Use reminders or alerts to ensure contributions and withdrawals align with regulatory deadlines.

6. Establish open communication with auditors

A good relationship with your SMSF auditor fosters a smoother audit process.

Steps to take:

  • Engage auditors early: Provide draft financial statements and documentation well before the audit deadline.
  • Address queries promptly: Respond quickly to any questions or requests for additional information.
  • Leverage auditor expertise: Seek advice on potential compliance risks or documentation gaps before the audit begins.

Pro tip:

Regular communication throughout the year helps identify and mitigate issues before they become problems.

7. Monitor regulatory changes

The SMSF landscape is dynamic, with frequent updates to rules and requirements.

Steps to take:

  • Stay informed: Follow ATO updates, industry news, and professional development events.
  • Update policies and practices: Ensure compliance processes and fund strategies reflect the latest regulations.
  • Educate trustees: Help trustees understand how changes affect their SMSF responsibilities.

Pro tip:

Partner with SMSF auditors who stay ahead of regulatory trends and can provide timely guidance.

8. Conduct a pre-audit review

A pre-audit review ensures that all issues are addressed before the auditor’s review.

Steps to take:

  • Perform internal checks: Compare fund activities against ATO compliance requirements.
  • Verify supporting documents: Ensure all investments, contributions, and transactions are backed by the necessary evidence.
  • Identify and resolve Issues: Fix discrepancies or missing documents before the audit begins.

Pro tip:

Use pre-audit reviews to train staff or trustees on better compliance practices.

Benefits of improved audit readiness

Faster audit completion

Minimising delays and back-and-forth with auditors.

Reduced compliance risks

Proactively addressing issues reduces the likelihood of ATO penalties.

Stronger relationships

Building trust with auditors enhances collaboration and efficiency.

Peace of mind

Trustees can feel confident that their SMSF is fully compliant.

Proactive audit readiness is a win-win for all

Improving SMSF audit readiness is a win-win for accountants, trustees, and auditors. By staying organised, maintaining compliance, and fostering strong communication, you can streamline the audit process and ensure that SMSF operations align with ATO standards.

Start today by implementing these best practices, and enjoy smoother audits and greater confidence in your SMSF management.

For assistance and expert SMSF audit advice, get in touch with our team today.

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