Self-Managed Super Funds (SMSFs) arose out of a curious anomaly in the original legislation. More than thirty years later there are 634,942 of them. With total funds under management of over $1 Trillion.

People were drawn to them by the freedom to invest their superannuation monies as they saw best.

But they are still subject to the same regulatory frameworks as other superannuation funds – overseen by the twin forces of the ATO and the Australian Securities and Investments Commission (ASIC).

The twins have the same vested interests: to ensure the integrity of superannuation.

That it is there to provide the money people want to enjoy a comfortable retirement.

The ATO oversees the technical administration of SMSFs.

ASIC’s role in regulating SMSFs

ASIC’s remit is broader than the ATO’s. ASIC’s focus:

• that the financial advice given to SMSF trustees is ethical and provided by a licensed professional
• that the trustees adhere to their obligations
• that the SMSF Auditors are independent and comply with their regulatory obligations.

ASIC’s mandate is to maintain market confidence in the superannuation industry and protect private individuals.

Its role is underpinned by the Superannuation Industry (Supervision) Act 1993 (SIS Act). With further guidance from Superannuation Industry (Supervision) Regulations 1994 and their many updates.

Their key responsibilities:

1. Licensing and registration of SMSF Auditors – to ensure they meet strict eligibility criteria, including the crucial test of independence.

So that trustees receive accurate, compliant, and un-biased audit reports from qualified  professionals.

 2. Monitor compliance – vigilant oversight of the activities of both trustees and SMSF auditors. To identify and address any breaches of the SIS Act or Regulations.

 3. Enforcement – to take disciplinary action against those that breach the Act or Regulations,  repeatedly.

Breaches – so what?

Everything in this story stems from ASIC’s core mandate: to protect the integrity of superannuation.

It’s not that ASIC wants to enforce penalties, and in fact its twin the ATO can take a conciliatory approach to trustee breaches – if they remediate their actions.

For repeat offenders, however, ASIC has a substantial arsenal.

They can impose:

• Administrative penalties: Fines for failing to meet their obligations, such as late lodgement of financial statements or failure to keep proper records.
• Civil penalties: Serious breaches, such as early access to funds or non-compliant investments, can result in significant financial penalties.
• Disqualification: Trustees can be disqualified by the ATO for repeated or severe breaches.
• Loss of SMSF status: If the fund is deemed non-compliant, it may lose concessional tax treatment, which could result in substantial financial losses.

For SMSF auditors, the gamekeepers of compliance, however, they take a much stricter approach. They face potential:

• Fines and professional sanctions: for breaches of professional standards or regulations.
• Deregistration: for misconduct or incompetence.
• Legal liability: if their actions contribute to significant financial loss for trustees or other stakeholders.

New data-matching powers

The Government is on a forever-quest to claw back as much unpaid tax as possible. After all, in their minds, it is a form of theft from other right-minded tax-paying citizens.

To help them they have invested tens of millions of dollars into the ATO’s technology platforms. With its data matching capabilities growing more powerful, at an exponential rate. Driven by AI algorithms gleefully seeking out avoiders.

In the SMSF world this shows up in targeted mailouts to tens of thousands of SMSFs, to alert them to potential breaches, asking for them to be remedied.

With an unofficial flag against their file.

In the latest episode, trustees of 16,500 SMSFs were put on notice for a lack of asset valuations over the previous three years. And likewise for the 1000+ associated auditors.

The ATO and ASIC twins are vigilant and watching.

Why SMSF Auditors matter

The sheer scale of the SMSF industry means that Sheriff ATO and Sheriff ASIC rely on Auditors to acts as their deputies. To oversee the activities of the funds, to ensure they are compliant with the SIS Act and SIS Regulations.

That the entire regulatory framework has integrity.

It’s why they are so hot on independence and enforce its requirements as set out by APES 110.

A lack of independence one of the key reasons why ASIC will deregister an SMSF auditor.

SMSF Auditor responsibilities include:

• Compliance – Auditors conduct independent reviews of SMSFs to verify compliance with legislative and regulatory requirements. This includes assessing the fund’s financial statements, investment strategy, and adherence to contribution and benefit rules.
• Integrity – Their work helps to ensure the credibility and reliability of SMSF operations. That trustees manage funds responsibly and give confidence to members and regulators.
• Remediation – When issues are identified, auditors play a vital role in guiding trustees toward rectification. This may include advising on corrective actions to address breaches or weaknesses in the fund's operations.

The impartiality and expertise of SMSF Auditors are foundational to maintaining public trust in the SMSF system. Without their oversight, the probability of non-compliance rises a lot.

And that would make the twins unhappy and put even more zealous scrutiny on the trustees and associated advisors.

ASIC and SMSF Auditor Registration

Naturally ASIC has stringent selection criteria when appointing their trusted deputies. To make sure they have the necessary skills and experience to do the job.

The registration process is rigorous. To become an SMSF Auditor applicants must:

1. Hold prescribed qualifications: this typically includes a degree in accounting or an equivalent qualification that meets the educational standards set by ASIC.
2. Possess relevant experience: applicants must have conducted a minimum number of SMSF audits under supervision to demonstrate their practical expertise.
3. Pass a competency exam: ASIC requires applicants to pass a rigorous competency exam that tests their knowledge of SMSF regulations and auditing standards.
4. Meet professional standards: Auditors must be members of an approved professional accounting body, such as CPA Australia or Chartered Accountants Australia and New Zealand.

Registration is not a one-time process.

Auditors must periodically renew their registration and demonstrate ongoing compliance with ASIC’s standards, including adherence to professional codes of conduct and ethical requirements.

And it does not stop there.

SMSFs are one of the most complex areas of tax law in Australia, with a continuous stream of regulatory updates, ATO rulings and court findings to be across.

It's why each year SMSF auditors must update their skills and knowledge through continuous professional development (CPD).

SMSF Auditor Register

To uphold high standards of professionalism and transparency, ASIC maintains the SMSF Auditor Register, a publicly accessible database of approved SMSF Auditors. The register serves several key purposes:

• Verification: Trustees and financial advisors can use the register to verify the credentials of an SMSF auditor, ensuring they are registered and meet ASIC's rigorous standards.
• Accountability: the register enhances accountability by providing details of registered auditors, including their registration number and disciplinary history.
• Transparency: by making this information publicly available, ASIC promotes trust and confidence in the SMSF audit process.

Using the register is straightforward. Trustees or advisors can search for auditors by name, registration number, or location. This tool empowers trustees to make informed decisions when appointing auditors, ensuring their fund is in capable and compliant hands.

In summary

SMSFs are a cornerstone of Australia’s retirement savings system, offering individuals the autonomy to manage their financial future.

However, this autonomy must be balanced with robust oversight to protect members and maintain system integrity. ASIC plays a vital role in this regulatory framework by ensuring SMSF auditors meet high standards of professionalism and compliance.

From the registration and monitoring of auditors to maintaining the SMSF Auditor Register, ASIC’s efforts are aimed at fostering trust and accountability within the sector.

Trustees, auditors, and advisors must recognise their roles and responsibilities within this system, understanding the consequences of non-compliance and the importance of adhering to regulations.

By prioritising transparency, integrity, and ongoing professional development, ASIC not only safeguards the interests of SMSF members but also upholds the broader stability and confidence in Australia’s financial system.

For trustees and auditors alike, a clear understanding of ASIC’s expectations is essential to navigating the complexities of SMSF regulation and contributing to a secure retirement future for Australians.