Can anyone offer informed comment on the following?
According to the ATO the Superannuation Industry Supervision Regulations state that the audit for a SMSF must be completed no later than a day before the tax return is lodged.
My accountant was late finishing the financial statements and tax return.
Should have been lodged on 15 May but it was not lodged (electronically) until ten days after that. In the Return document she has completed the Auditor's section and put a 'Yes' in the box which asks "Did the fund comply with all relevant SIS requirements", thus indicating to the ATO that the audit has been completed.
Is she herself the nominated Auditor?
If not, then of course she had no right to make a statement like that on the Auditor's behalf. Doubly so, if the audit process has not been completed yet.
(In the meantime I have paid the tax owing so as not to incur displeasure from the ATO.)
Are you comfortable with the amount of tax? Do you have any reason to believe it may not be correct?
I have said to her that I am unhappy about the way she has gone about this as I really feel uncomfortable being associated with anything which could render the Fund non-compliant.
All correct sentiments, but so far, the ATO has generally gone out of its way to avoid making a SMSF non-compliant. As long as the Trustees show willingness to correct their ways, the Commissioner will generally refrain from imposing that sort of penalty.
This may be about to change however, as the ATO has announced it believes it has been too nice for too long and it is now time to move from a purely educational stand to one incorporating stricter enforcement and penalties, where appropriate.
Unfortunately, in my experience many accountants who deal with SMSF clients are not overly educated in general SMSF matters. A bit like financial planners, who just want to get the SMSF money into their preferred wrap platform, many accountants just want to crunch the tax figures, without much regard for compliance.
Many accountants also tend to abuse the one feature of a SMSF that is amongst the best that this structure offers - the benefit of hindsight, where you are able to, for example, amend the structure of your annual contributions once you know your personal tax position, so as to obtain the most tax advantageous outcome. This however also allows a sloppy Trustee/accountant the ability to change many aspects of the SMSF's operation a long time after the actual event - which leads some of them to believe there is no need to do it properly in the first place, because it will get fixed later.
Incidentally, I have come across SMSFs where the Trust Deed could not be located, there never apparently was an Investment Strategy, the Member was years past age 65, not working and yet not drawing a pension (before compulsory cashing was abolished) and yet the Auditor
kept happily signing off on the tax returns!
A recent case I have worked with involved a client who believed his SMSF was in a pension stage and therefore internally tax-exempt; yet no documentation existed to show this and his accountant/Auditor both thought they could just manipulate journal entries, rather that make physical drawdowns, to satisfy the minimum pension requirement (this fellow does not need the pension money to live on - he just wanted to save the 15% tax!)
A fund with several million dollars in it tends to save a lot of tax once fully in pension stage and it is not such a hard task to get the paperwork in order & make the annual drawdown - even if you then just contribute the excess cash back in again. Yet the accountant thought there was no need to bother with any of that...!
In such instances of course you could claim this was a breach at the professional/accountant level, and the ATO would/should reserve most of its wrath for the Auditor who signed off on it rather than the Trustee.
But in any case, who needs the hassle, hey?
My advice would be to just find a more skilled/professional accountant.
If the audit is supposed to be done before the tax return is lodged then that is what should happen.
Indeed.
All the relevant input material was available to her since the end of the 2006/07 financial year.
This is what often happens though. Accountants are notorious for falling behind with their work and then there is a mad rush to meet the last available deadline. This is how mistakes are then more likely to occur.
If she can't cope with the workload, she should employ another accountant.
Now she is saying it is her 'standard practice' that the fee (which is twice what she estimated) be paid before the audit is done.
I would be asking how come she was so far out with her fee estimate? Was there something in your returns that had not been obvious/anticipated at the start?
The fees quoted are quoted for a reason; otherwise what's the difference between that and, say, a real estate agent that quotes an outrageous price on your property solely to secure the listing?
I have said I find that unacceptable, and that we will not be signing off on the financial statements or the tax return until we see the signed audit.
I would be also looking closely at the Auditor. If this accountant is sloppy, the Auditor may well also be. Good Auditors will not work with sloppy accountants because it is ultimately their skin on the line, if something is not right.
Has anyone encountered a similar situation?
See above.
Obviously I will be disputing the fee, she assumes this, and hence her request for the money before I 'get the goods'.
Any suggestions would be appreciated.
Sounds pretty dodgy to me. I would not be paying until the job has been properly completed and, just as you say, I would be questioning why the fee was so far out of the initial estimate.
If the accountant found no unexpected items which would have required the extra work, then there is no justification for the extra fee. Her being inefficient does not qualify.
Cheers,
T. R.