In October Treasury put some proposed changes to various legislation including SISA and SISR out to consultation. The most significant change affecting SMSFs is the introduction of a deadline for the accounts to be prepared and ready for audit.
The new regulation prescribes a time by which annual accounts and statements must be prepared for SMSFs. Currently, there is no time limit. The proposed new regulation requires accounts and statements to be prepared at least 45 days before the day which s35D of the Act requires a return to be lodged by an entity. For FY20/21 most funds who use a tax agent would normally be required to lodge by 15 May. Subtracting 45 days creates a new deadline of 31 March 2021 for the completion of the accounts.
So, what does this mean for accountants?
Technically if the accounts are not completed outside 45 days of the lodgement period they are in breach of SISR. For funds with a 15 May deadline, this will have very little impact as most accountants prepare their accounts throughout the year and comfortably meet the deadline.
Funds with a 30 October deadline would require their accounts prepared by 16 September and 28 February deadlines needed to be prepared by 14 January.
Feedback from the SMSF Association
The SMSF Association has raised significant concerns with this proposed amendment suggesting that in their opinion, providing less time for SMSF Trustees and professionals to prepare financial statements will deliver no tangible benefits to the sector while being disruptive at the same time.
They continued to suggest that imposing a 45-day financial preparation timetable is not a minor amendment for the SMSF sector. The association believe the policy consequence of this proposal will simply be to bring forward the already legislated SMSF lodgement date for no apparent reason or benefit and they do not support the measure.
I am not that fussed by this proposed change. I don’t believe accountants try to prepare accounts in the last few days before the deadline. Clients with large tax refunds are usually demanding their fund is completed early so they can receive their refunds. Would a 31 March timeline to complete accounts be unrealistic? Most accountants complete the bulk of their funds by Christmas. If an accountant was having difficulties an extension request has usually been well received by the ATO. Who is to know if the deadline is extended again this year to 30 June as it has been in the past?