Every SMSF must be audited every year by an independent approved SMSF auditor before its annual return can be lodged. The audit is not a formality: the auditor checks both the fund’s financial statements and whether the trustees have complied with superannuation law, and must report certain breaches to the ATO. Funds that hand over a complete file get a faster audit and fewer queries. This SMSF audit checklist sets out what auditors look for and what trustees should have ready.
The two parts of an SMSF audit
- Financial audit: are the financial statements and member statements accurate, are the assets owned by the fund, and are they valued at market value?
- Compliance audit: did the trustees follow the Superannuation Industry (Supervision) Act and Regulations during the year?
The auditor must be registered with ASIC as an approved SMSF auditor and must be independent: they cannot audit a fund whose accounts their own firm prepared. Trustees must appoint the auditor at least 45 days before the annual return is due.
Documents to provide
- Signed financial statements, member statements and the draft annual return
- Trust deed and any amendments, and the signed trustee declaration for any new trustee
- Trustee minutes for the year, including investment decisions, pension commencements and contribution acceptances
- The current investment strategy, signed and reviewed during the year
- Bank statements for the full year, and broker, managed fund and term deposit statements showing holdings at 30 June
- Market valuations of property, unlisted investments and collectables, with how they were determined
- Rental statements, leases and property expense invoices
- Loan documents for any limited recourse borrowing arrangement, and evidence of repayments
- Contribution records, including notices of intent to claim a deduction and the fund’s acknowledgements
- Pension documents, minimum payment calculations and actuarial certificate where required
- Transfer balance account reports lodged during the year
The compliance areas auditors focus on
| Area | What the auditor checks |
|---|---|
| Sole purpose test | The fund is maintained only to provide retirement benefits, with no current-day benefit to members or relatives |
| Separation of assets | Fund assets are held in the fund’s name, separate from members’ personal and business assets |
| Loans and financial assistance | No loans or financial assistance to members or relatives |
| Related party acquisitions | Assets were not acquired from related parties unless an exception applies, such as listed shares or business real property at market value |
| In-house assets | Investments in or loans to related parties, and leases to related parties, are within 5% of fund assets |
| Arm’s length | Purchases, sales, rent and loans are on commercial terms |
| Contributions and benefits | Contributions were accepted within the rules, and benefits were only paid when a condition of release was met |
| Pensions | Minimum pension payments were made in cash by 30 June |
| Borrowing | Any borrowing is a compliant LRBA. From 10 August 2026, new LRBAs over real property are limited to business real property |
What happens when the auditor finds a problem
The auditor issues an audit report and, where needed, a management letter to the trustees. Breaches that meet the ATO’s reporting criteria must be reported on an auditor contravention report. Depending on the breach, the ATO can require rectification, issue an education direction or administrative penalties, disqualify trustees or, in serious cases, make the fund non-complying. Trustees who identify and fix a problem before the audit, and explain it in the minutes, are in a far better position than trustees whose breach is found by the auditor.
How to get a quicker, cleaner audit
- Review the investment strategy and sign it each year, not just at set-up
- Get valuations of property and unlisted assets at 30 June every year
- Minute every significant decision as it happens
- Never pay personal or business expenses from the fund’s account, even temporarily
- Send the complete file at once, rather than in pieces
Frequently asked questions
Can my accountant also audit my fund?
No. The auditor must be independent of the firm that prepares the accounts.
When does the audit have to be finished?
Before the annual return is lodged, so the auditor has time to complete it within the return due date. The ATO expects the auditor to be appointed at least 45 days before that date.
Is the audit fee deductible?
Yes. It is a deductible expense of the fund.
Independent SMSF audits in Melbourne
Kennedy Tax & Business Services provides independent SMSF audits for funds administered by other accountants and administrators, and SMSF accounting for funds that need an accountant, with an independent auditor arranged. Read our guides to the SMSF annual return and minimum pensions, or contact us.
This article is general information only and does not take into account your circumstances. Speak to a registered tax agent or approved SMSF auditor before acting.
