In June 2020, the ATO updated the independent auditor's report instructions (IAR) so that auditors would not need to modify their opinion in Part B of the IAR with respect to certain contraventions arising from the impacts of COVID-19 for the 2019-20 and 2020-2021 financial years.

Such contraventions of the SIS Act include, for example, breaches of section 65 where financial assistance comprising a rental waiver, reduction or deferral has been provided directly or indirectly to a related party tenant due to the impacts of COVID-19 on commercial terms.

Following feedback from auditors on internal inconsistencies in the IAR, the ATO has recently reverted to their pre-June position and changed the IAR instructions back to their original wording. Accordingly, auditors will once again be required to modify their opinion in Part B of the IAR where they identify any material breach of the provisions and regulations listed within the IAR.

This means an auditor who identifies any contraventions (regardless of whether they are covered by COVID-related administrative concessions or not) will still need to notify the SMSF trustee of these contraventions in the management letter to the trustee and include them in their report to the ATO. While the ATO have stated they won’t apply any compliance resources in respect of certain COVID administrative concessions, they may still review the contraventions for other breaches, including the overarching arm’s length requirements in the superannuation laws.

SMSF trustees should therefore ensure that any action taken under the administrative concessions are on a “COVID arm’s length basis” and are supported by documentary evidence.

To discuss further or for more information please contact:

Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au