Think like an auditor

greatly improve your SMSF advice

DisclaimerThis presentation was prepared by SMSF Outsource Solutions ABN 37 373 020 559.

SMSF Outsource Solutions is a provider of independent SMSF audit services to accountants, advisors and Trustees.

The information contained in this presentation is intended as generalinformation only and has been prepared without taking into account theneeds, objectives or financial information of any particular person. Priorto making any decision, you should assess whether the information isappropriate to your particular needs, objectives and financial circumstances.

While SMSF Outsource Solutions has taken reasonable care in the preparation of this information, subsequent changes in circumstances (including legislativechange) may occur at any time and may impact on the accuracy of this information.

Let’s have some fun!!

Open your mind, don’t mind the stereotypes!

The stakes are high

the value of a good night sleep

Everyone grab an “audit hat”

prevention is always better than the cure

Choose your auditor wisely

Every SMSF professional

should own their very own “audit

hat”

Everyone grab an “audit hat”

prevention is always better than the cure

Tip #1 Complete advice that covers

the life of the investment

Everyone grab an “audit hat”

prevention is always better than the cure

Tip #2 Consider every SIS rule that

may apply

Everyone grab an “audit hat”

prevention is always better than the cure

Tip #3 Dot the i’s and cross

the t’s

Everyone grab an “audit hat”

prevention is always better than the cure

Tip #4 Address the

practicalities Step by Step

Everyone grab an “audit hat”

prevention is always better than the cure

Tip #5 Think about “what

could go wrong”

Everyone grab an “audit hat”

prevention is always better than the cure

Tip #4 Address the practicalities Step by Step

Tip #5 Think about “what could go wrong”

Tip #1 Complete advice that covers the life of

the investmentTip #2 Consider every

SIS rule that may apply

Tip #3 Dot the i’s and cross the t’s

Get proactive with your auditor

it starts on Day One

• Communicating from Day One

• Pre- Audit checklist

• Save time and aggravation!

• Minimise the assumptions your auditor has to make

Audit War Stories

what can we learn?

Case Study 1: Business Real PropertyThe Hill Family SMSF purchased a commercial property from the members in 2008/09 for $1.5 million. The Trustees acted under the advice of their accountant who recommended the property be transferred into their SMSF for tax planning and asset protection.

At the time the property was acquired from the members, it was leased solely to the Hill family business. The accountant was meticulous in ensuring the property met the business real property definition to be able to be purchased from the members (SIS s.66), a formal valuation was obtained to support the purchase price, and the transfer was done on arms length terms.

The super fund received legal title to the property on 15 June 2009. So all looked good. However during the advice stage the accountant had focused solely on getting the property into the fund and the SIS rules that related solely to that transaction………so what happened next?

Audit War Stories

what can we learn?

• Rental arrangements with related partyThe family business continued to use the property for business use but no written lease agreement was put in place and as a result the Trustees never formally set what rent was due and when. In fact no rent was paid from the business to the SMSF until 30 June when $150,000 was transferred across as rent for the 2010 year.

• A New residential tenant spells “In-House Asset”Only a couple of months after the original purchase, the Trustees decided to lease out a section of the premises to an unrelated third party. Great intentions to maximise the return for their fund. The accountant gave the OK and perhaps because it hadn’t been addressed in the original advice failed to recognise the property needed to continue to be “business real property” indefinitely. The accountant gave the OK, the residential lease was signed with the arms length tenant and from 15 Sep 09 the property was no longer business real property.

Audit War Stories

what can we learn?

Case Study 2: Related Party Loan

A client calls his advisor to check if his super fund can make a loan to a related party for $30,000.

The advisor checks the market value of the fund’s assets and confirms the loan will be < 5% of the assets so there’ll be no problems. The client goes ahead with the loan.

How many ways could a loan under 5% of the assets of the fund breach SIS?

Audit War Stories

what can we learn?

• Loans to members or their relatives

• No written loan agreement

• No interest charged or interest below market value

• No interest or capital repayments & no action to recover

• Does the fund have other in-house assets?

• Investment strategy

• Ability to repay – early access?

• Avoidance issues – look through provisions

Audit War Stories

what can we learn?

What’s hot for 2011

• Limited recourse loans

• Contribution cap breaches – limits reduced, bring forward triggers

• Related trusts failing Reg 13.22C

• Loans to members

• Acquisition of assets from members not permitted

• Personal use of holiday houses

• Confusion over conditions of release

• Non arms length transactions

Independence?There’s a BIGGER

picture

what floats your boat?87% of firms surveyed that use outsourcing say it

delivers the benefits that they expected-PWC “Outsourcing comes of age”

.

• The golden ticket?

• Not all outsourcing arrangements are equal

• Auditors – proof of the integrity of the SMSF industry

• A commercial business decision, not a legislative decision!

Independence?There’s a BIGGER

picture

what floats your boat?

HOT TIP:Interview your auditor like you would

a potential new and important member of your team

Why you MUST get it right:

• Quality control - Your safety net

• Your reputation & brand

• Expand your knowledge pool

• Turnaround

• Client Relationships

Walkman or I-pod?

taking your practice to the next level

• Structured & unstructured staff training

• Quality of work-papers and process improvement

• Increase efficiency to improve profitability & cash-flow

• Software selection

• Compliance support when you need it most

• Managing contribution cap issues

• Maximising pension and tax efficiency

Walkman or I-pod?

taking your practice to the next level

• Pro-active communication

• Improve client relationships

• Minimise client stress when things go wrong

• Trustee education

• Succession planning

• Appropriate & timely rectification

Let’s work together – rectifying breaches

EVERY problem has a solution!

• Don’t Panic

• Take advantage of your auditor’s experience

• Aim for a Rectified breach

• Be careful not to over-rectify

• Co-operate

Think like an auditor = a real competitive advantage

taking your practice to the next level

The stakes are high

Put on your own “audit hat”

Get proactive with your auditor

Independence?

Think bigger!

Value-add audits – the

next generation

Upcoming Events

Date Details

Tues, 15 March 2011 Divorce & Super – Marriage breakdown in SMSFs

Guest speaker: Julie Steed, Australian Executor Trustees Ltd

Tues, 19 April 2011 SMSF Technical & Legislative update

Guest speaker: Peter Burgess, SPAA Technical Director

greatly improve your SMSF advice