Every SMSF in Australia must be audited by an approved SMSF auditor each financial year. No exceptions. No size thresholds. The audit has two parts: a financial audit (are the accounts right?) and a compliance audit (has the fund followed the rules?). SMSFcentral coordinates the process end-to-end with ASIC-registered auditors, so findings are dealt with before they become ATO problems.
What’s Included
Our audit coordination service covers:
- Auditor appointment and engagement. We work with a panel of ASIC-registered SMSF auditors who are independent of the fund and its advisers.
- Audit file preparation. Assembly of all financial statements, trust deed, minutes, investment records, bank statements, and supporting documents the auditor needs.
- Financial statement preparation. Operating statement, balance sheet, and member statements prepared to audit-ready standard.
- Pre-audit compliance review. We check for common compliance issues before the auditor sees the file, giving trustees time to fix problems.
- Audit query management. We handle all auditor queries, source missing documents, and provide explanations on the fund’s behalf.
- Audit report review. We review the completed audit report with you and the trustee, explaining any qualifications or findings.
- If the audit identifies contraventions, we help prepare the corrective action plan and associated documentation (remediation support).
- ATO lodgement. The annual return is lodged incorporating the auditor’s findings.
Our Process
- Confirm auditor independence. We verify that the appointed auditor meets ASIC registration requirements and has no conflict of interest with the fund, its members, or its advisers. The auditor must be independent: they cannot have prepared the financial statements they are auditing.
- Prepare the audit file. We compile the full audit pack: trust deed (and any amendments), trustee minutes, investment strategy, financial statements, bank statements, broker reports, property valuations, pension documentation, and contribution records. A complete file means fewer queries and faster turnaround.
- Run a pre-audit compliance check. Before sending the file to the auditor, we review the fund against common compliance requirements: sole purpose test, in-house asset rules, arm’s-length dealing, investment strategy consistency, contribution caps, pension minimum payments, and related-party transactions. Issues identified at this stage can often be corrected before the audit.
- Engage the auditor. We send the complete audit pack to the ASIC-registered auditor with a cover letter summarising the fund’s activities for the year, any unusual transactions, and any matters we want to draw to the auditor’s attention.
- Manage audit queries. The auditor will typically raise questions. We handle all correspondence, source additional documents, and provide written responses. Most audits involve two to three rounds of queries.
- Receive and review the audit report. The auditor issues two reports: a financial audit report (opinion on the accounts) and a compliance audit report (opinion on SIS Act compliance). We review both and explain any qualifications, contraventions, or reportable matters to you and the trustee.
- Remediate and lodge. If the audit identifies contraventions, we assist with corrective action. That might mean disposing of an excess in-house asset, documenting a missing investment strategy review, or rectifying a failed pension payment. The annual return is then lodged with the ATO, incorporating the audit outcome.
Regulatory Context
The Audit Requirement
Section 35C of the SIS Act requires every SMSF to be audited each financial year by an approved SMSF auditor. The auditor must be registered with ASIC under section 128B of the SIS Act. There is no exemption based on fund size, number of members, or asset value.
The auditor must be independent of the fund. They cannot be a trustee, member, employer-sponsor, or a relative of any of these. They also cannot have prepared the financial statements for the fund in the same year.
What the Auditor Checks
Financial audit: The auditor forms an opinion on whether the fund’s financial statements give a true and fair view of its financial position. They verify asset existence, confirm bank balances, check valuations, and test transactions for accuracy.
Compliance audit: The auditor tests the fund against key SIS Act requirements:
- Sole purpose test (s62)
- Investment strategy documentation and review (s52B(2)(f))
- In-house asset limit, no more than 5% of total assets (Part 8)
- Arm’s-length dealings with related parties (s109)
- Contribution acceptance rules and caps
- Pension payment compliance (minimum and maximum drawdowns)
- Lending to members prohibition (s65)
- Borrowing rules (s67)
- Collectible and personal use asset storage and insurance rules (reg 13.18AA)
Qualified Audit Reports
Under section 128F of the SIS Act, if the auditor identifies a contravention or suspected contravention of the SIS Act, they must report it to the ATO. This is known as an Auditor Contravention Report (ACR). Reportable matters include breaches of the sole purpose test, in-house asset excess, illegal early access to benefits, and non-arm’s-length transactions.
An ACR does not automatically mean the ATO will take action. The ATO assesses each report and may issue an education direction, a rectification direction, or in serious cases, make the fund non-complying (which triggers tax at 45% on the fund’s assets).
Common Pitfalls
The annual return is due by the tax agent lodgement deadline, typically mid-May for 30 June year-end funds. Engaging the auditor in April leaves almost no room to resolve queries or fix findings. We send audit files to the auditor within 8 weeks of receiving all source documents, which gives enough time to sort things out properly.
The number one cause of audit delays is missing documents. A bank statement gap, an unsigned minute, a missing property valuation: any of these adds weeks. Auditors will not sign off with gaps in the file. They cannot.
The auditor must be independent of whoever prepared the financial statements. If the same firm does both, the independence requirement is broken. This is a contravention that gets reported to the ATO.
A qualified audit report flags a problem. If the same qualification turns up two or three years running (a recurring in-house asset excess, a missing investment strategy review), the ATO will eventually step in. Repeated contraventions look like a governance failure, and that draws serious regulatory attention.
Frequently Asked Questions
Yes. Section 35C of the SIS Act requires an annual audit by an approved SMSF auditor. There are no exceptions based on fund size, activity level, or asset type. Even a fund that had no transactions during the year must be audited.
Only an ASIC-registered SMSF auditor can conduct the audit. The auditor must hold current registration under section 128B of the SIS Act. They must also be independent of the fund: they cannot be a trustee, member, or relative of a trustee or member, and they cannot have prepared the fund’s financial statements.
An ACR is a report the auditor must lodge with the ATO when they identify a contravention or suspected contravention of the SIS Act during the audit. Common triggers include in-house asset breaches, non-arm’s-length transactions, and illegal early access to benefits. The ATO uses ACRs to decide whether further regulatory action is needed.
A simple audit with clean records, uncomplicated investments, and no compliance issues typically takes 2 to 4 weeks from the date the auditor receives the complete file. Funds with property, related-party transactions, or compliance issues may take 4 to 8 weeks. The most common cause of delay is missing documentation.
The auditor will note the issue in their report and may lodge an ACR with the ATO. The trustee is then expected to rectify the breach. In many cases, the ATO will issue an education direction (for minor first-time breaches) or a rectification direction (requiring the trustee to fix the problem within a set timeframe). Serious or repeated breaches can result in penalties or the fund being made non-complying.
Yes. Trustees can appoint any ASIC-registered SMSF auditor, provided the auditor is independent of the fund. SMSFcentral maintains a panel of experienced SMSF auditors, but you are free to nominate your preferred auditor if they meet the independence and registration requirements.
Related: Day-to-Day Administration and Compliance | SMSF Investment Strategy Requirements | SMSF Valuations
Get Audit-Ready
Call 02 8412 0086 or email [email protected]. We prepare the file, manage the queries, and help fix whatever the auditor flags.
Review of investment strategies to ensure they meet current standards and are in line with each fund's current investment portfolio.
Full review of the fund's transactions for the financial year.
Creation of annual trustee minutes to incorporate purchases, sales, benefit payments and contributions made during the year, in line with auditing requirements.
Follow up through the audit review to efficiently answer any queries from the auditor.