Where an SMSF holds real property, auditors are required to obtain sufficient and appropriate audit evidence to confirm that the property is not subject to an impermissible charge or encumbrance.
The Australian Taxation Office (ATO) sets out its expectations for SMSF auditors in its current guidance on conducting compliance audits. Under the heading "Regulation 13.14: charges over assets", the ATO states that auditors should check that trustees have not given a charge over fund assets by obtaining appropriate evidence, including:
This guidance reflects the ATO's view that auditors cannot rely solely on prior-year audit files or trustee representations when assessing whether real property is free from charges.
The current ATO guidance can be accessed here: https://www.ato.gov.au/tax-and-super-professionals/for-superannuation-professionals/smsf-auditors/auditing-an-smsf/compliance-audit-of-an-smsf
Even where a property has been held by the SMSF for many years, circumstances can change without the auditor's knowledge. For example:
For this reason, the ATO expects auditors to independently verify the property title each financial year to confirm that no impermissible charge exists and that any security interest (where applicable) is appropriately limited.
In August 2023, the ATO published web guidance highlighting deficiencies identified during compliance reviews where auditors had failed to obtain sufficient evidence to confirm that fund assets were free from charges. While that specific ATO webpage has since been removed, the audit expectation itself has not been withdrawn and is now reflected in the ATO's current compliance audit guidance.
DBA Lawyers published a summary of the ATO's position at the time, noting the increased focus on auditors obtaining adequate evidence in relation to charges over SMSF assets, particularly real property. That article remains a useful reference in understanding the ATO's compliance approach.
The DBA Lawyers article can be found here: https://www.dbalawyers.com.au/ato/critical-new-ato-webpage-all-smsf-auditors-must-pay-close-attention/
In practical terms, where an SMSF owns real property, auditors are expected to obtain a current property title search for each property for every financial year as part of the audit process.
This requirement applies regardless of whether:
Where a current title search is not provided as part of the audit documentation, we will obtain the title search on behalf of the fund. A disbursement fee of $44 (including GST) will apply per property title where we are required to do so.
This fee reflects the external cost of obtaining the title search.
Our fees page has been updated accordingly and can be viewed here: https://justsmsfaudits.com.au/fees