It has been said that the Self-Managed Super Funds (“SMSF”) sector is an important part of our superannuation system 1. ASIC recently reviewed a number of files randomly based on Australian Taxation Office data and assessed compliance with the “best interests” duty and related obligations found in the Corporations Act. It found that in 91% of files reviewed, the advisor did not comply with the “best interest” duty and related obligations in the Corporations Act 2.
Auditors of SMSF’s have also recently come under scrutiny in two recent decisions.
In Cam & Bear Pty Ltd v McGoldrick  NSWCA 110, the NSW Court of Appeal found the SMSF Auditor negligent for failing to provide adequate warnings to the SMSF Trustee as to the recoverability of assets which were described as “cash”. The Court considered that these assets were actually unsecured loans to a company related to the SMSF’s investment advisor and that the auditor had an obligation to investigate the recoverability of the “cash”. The auditor was also required to provide a qualified opinion given that he was a “very experienced accountant and auditor who was engaged for the purpose of protecting the Fund and its trustee against financial risks”.
Similarly, in Ryan Wealth Holdings Pty Ltd v Baumgartner  NSWSC 1502, the Court held that the SMSF auditor failed to detect and report to the Trustee irregularities which had existed over a number of years. The irregularities concerned a number of unsecured loans which were entered into by the plaintiff. It was alleged that the auditor knew, or ought to have known, that the investments were high risk and that pension from the SMSF was the beneficiaries sole source of income. The Court ordered damages payable to the plaintiff in the amount of $2.26 million which included a 10% apportionment to the plaintiff for contributory negligence.
ASIC guide for SMSF auditors
On 4 March 2019, ASIC issued “RG 243 Registration of self-managed superannuation fund auditors”, expressed to be a guide for those who wish to conduct audits of managed superannuation funds pursuant to the “Superannuation Industry (Supervision) Act 1993 3.” This guide deals with eligibility requirements for registration; lodging the application for registration; obligations on auditors after they registered and right to review. We will talk more about RG 243 in an upcoming newsletter/blog.
The judgements referred to above highlight the standard of care courts have applied where the trustee of the SMSF is relatively unsophisticated in financial affairs. For any advice or assistance in relation to these matters please do not hesitate to contact Shane.
1. ASIC press release “18-192MR SMSF advice needs significant improvement – 28 June 2018 (ASIC Deputy Chair Peter Kell)”.
2. Ibid – ASIC press release – 28 June 2018.
3. ASIC Regulatory Guide 243 “Registration of self-managed superannuation fund auditors” – 4 March 2019.