ATO outlines focus areas for SMSF auditor compliance in 2025

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The regulator has said that in 2024 more than 32,000 new funds entered the sector – an increase of 21 per cent from 2022–23, with the SMSF population growing to over 625,000 and holding more than $1 trillion in assets.

It emphasised the critical role that SMSF auditors play in maintaining the health and integrity of the sector and the importance of understanding their obligations, including what the ATO considers the biggest risks in 2025.

As previously highlighted by the ATO, it is again heavily scrutinising market valuations and reminded approved SMSF auditors that they are responsible for verifying and retaining sufficient audit evidence to support the market value of assets.

“Where there's insufficient evidence you must consider modifying the independent auditor's report (IAR). You must also lodge an auditor contravention report (ACR) where the reporting criteria is met,” the Tax Office said.

In 2024, the ATO contacted auditors where SMSFs they audited reported unchanged values for certain assets across several income years and will continue this program in 2025, including reviewing auditors where asset values remain the same and no ACR is lodged.

This year, the ATO said it will also continue its focus on auditors who audit a large number of SMSFs. This includes auditors who regularly undertake over 1,000 audits per year or have rapidly increased their audit numbers in recent years.

It said it would visit auditors at their offices to review their audit process.

It will look closely at disqualified trustees and said auditors must confirm that the trustees of the SMSF are not acting as trustees or directors of a corporate trustee while a disqualified person.

It will be reviewing auditors where its information indicates trustees have acted while a disqualified person and no ACR has been lodged.

Additionally, the ATO will focus on high-risk auditors, having said it will use its range of data and intelligence about the SMSF auditor population to identify auditors it considers high-risk.

Those auditors it considers high risk will continue to be audited and referred to ASIC if they have not complied with their obligations.

“Auditors with low, fixed-price business models continue to be a concern for the ATO. These models inherently restrict the amount of time an auditor can spend on an audit and can lead to lower quality audits, particularly where the SMSF has more complex investments,” the Tax Office said.

Finally, the regulator said it would also be looking at auditor independence, noting that an approved SMSF auditor is required to comply with independence requirements as part of their professional obligations.

Following an increase in referrals to ASIC in the last financial year that included independence issues, the ATO will focus on auditors it considers high risk. This includes auditors:

· Conducting in-house audits.

· With reciprocal auditing arrangements.

· That have a long association with clients.

· Have a large proportion of their client base come from a single referral source.

Keeli Cambourne
27 February 2025
accountantsdaily.com.au