The SMSF audit is the ATO's eyes on your fund. The ATO doesn't look at most SMSFs directly each year; it relies on the independent auditor to check the accounts and the compliance, and to report breaches. That's why the audit matters more than many trustees realise. A finding this year can become an ATO letter next year.
This guide explains what the auditor checks, why they must be independent, how they decide what to report, the contraventions that come up most, and how to prepare so the audit finds nothing. We prepare SMSF accounts and coordinate the audit with an approved independent SMSF auditor. We don't audit funds ourselves, for reasons explained below.
What is an SMSF audit?
It's an annual, independent examination of the fund, done by an approved SMSF auditor registered with ASIC. The trustees appoint the auditor no later than 45 days before the annual return is due, and the audit must be finished before the return is lodged, because the return reports the auditor's details and the audit outcome.
The audit has two parts.
| Part | What it covers | The question it answers |
|---|---|---|
| Financial audit | The statement of financial position and operating statement | Do the accounts fairly present the fund's assets, liabilities and results? |
| Compliance audit | Specific sections of the super law and regulations | Did the trustees follow the rules during the year? |
The auditor gives the trustees an audit report covering both parts. Where they find a breach, they must tell the trustees in writing. Where the breach meets the ATO's reporting tests, they must also lodge an auditor contravention report (ACR) with the ATO.
Why must the auditor be independent?
The auditor is checking the trustees' work and, in effect, the accountant's work. That only means something if they have no stake in the answer. An approved SMSF auditor must be registered with ASIC and follow the auditing and assurance standards and professional independence rules. In practice that means the auditor:
- can't have a financial interest in the fund
- can't have a close personal or business relationship with the trustees or members
- can't audit a fund whose financial statements they or their firm prepared
That last rule is why your accountant can't also be your auditor. We prepare the accounts and the audit file, then an approved independent auditor audits them. We handle the back-and-forth so you don't have to, but the auditor's opinion is their own.
What does an SMSF auditor actually check?
The financial audit
- every asset exists and is held in the name of the trustees for the fund
- assets are valued at market value at 30 June, with objective and supportable evidence
- income, expenses, contributions and benefit payments are recorded correctly
- bank and investment balances agree with third-party statements
- member balances are allocated correctly between members
- tax is calculated and accounted for correctly
The compliance audit
These are the rules auditors test most closely and that sit within the ATO's reporting criteria.
| Rule | Law | What the auditor looks for |
|---|---|---|
| Fund meets the SMSF definition | s 17A | Members and trustees line up, no employer-employee relationships except relatives, six members or fewer |
| Accounts and records | ss 35AE, 35B | Accounts kept and prepared properly, signed statements |
| Documents given to the auditor | s 35C(2) | Trustees provided what was asked within 14 days |
| Sole purpose | s 62 | No present-day benefit to members or relatives |
| Loans and financial assistance to members | s 65 | No loans or help given to members or relatives |
| Acquisitions from related parties | s 66 | Only allowed assets (such as listed securities or business real property) bought from related parties, at market value |
| Borrowing | ss 67, 67A | No borrowing except a compliant limited recourse arrangement |
| In-house assets | ss 69–85 | Related-party investments, loans and leases kept within the 5% limit |
| Minutes and records | ss 103, 104, 104A, 105 | Decisions minuted, trustee changes recorded, trustee declarations signed |
| Arm's length dealings | s 109 | Investments made and kept on commercial terms |
| Disqualified persons | s 126K | No disqualified trustee or director |
| Investment strategy | reg 4.09 | A fund-specific strategy, reviewed regularly, followed in practice |
| Separation of assets | reg 4.09A | Fund money and assets kept separate from members' and businesses' |
| Allocation of earnings and benefits | regs 5.03, 5.08 | Earnings allocated fairly; benefits preserved correctly |
| Payment of benefits | reg 6.17 | Benefits only paid when a condition of release is met; pension minimums paid |
| Accepting contributions | reg 7.04 | Contributions accepted only when allowed (age, caps, TFN) |
| Market valuation | reg 8.02B | Assets valued at market value for the accounts |
| Charges over assets | regs 13.12–13.14 | No charges or mortgages over fund assets, except as allowed for an LRBA |
| Collectables and personal-use assets | reg 13.18AA | Artwork, cars, wine and similar stored, insured and not used by related parties |
The auditor checks the investment strategy exists, covers what the law requires, has been reviewed and matches what the fund holds. Our investment strategy guide explains what that means.
When does the auditor have to report a breach to the ATO?
The ATO sets reporting criteria as a series of tests, applied in order. In plain English:
- Fund definition. If the fund no longer meets the SMSF definition, or a disqualified person is a trustee or director, it's always reported.
- New funds. If the fund is less than 15 months old at year end and any single contravention is more than $2,000, every listed contravention is reported, whatever the size.
- Repeat breaches. If the trustees were told about a breach of the same rule before and did it again, it's reported, even if small.
- Unfixed breaches. If a breach from a previous year still hasn't been fixed at the time of the audit, it's reported.
- Missed time limits. If a statutory deadline was missed by more than 14 days, it's reported.
- 5% of fund assets. If the total value of contraventions is more than 5% of the fund's total assets, they're reported.
- $30,000. If the total value of contraventions of a listed rule is more than $30,000, they're reported.
Auditors can also report other matters they think the ATO should know about. So "below the threshold" doesn't mean "ignored": the trustees are still told in writing, and the same breach next year can be reported under the repeat rule.
Which contraventions come up most often?
These are the breaches we see auditors raise most, and how they usually happen.
| Contravention | How it typically happens |
|---|---|
| Loans or financial assistance to members | Fund money used to cover a member's personal or business bill "for a few days" |
| Separation of assets | Rent paid into a personal account; fund shares held in a member's own name; fund bank account in personal names |
| In-house assets over 5% | A related-party loan or investment grows, or other assets fall, pushing the ratio over 5% at 30 June |
| Sole purpose | A member or relative uses a fund holiday house, or the fund pays for something that benefits a member now |
| Related-party acquisitions | The fund buys an asset from a member that isn't listed or business real property |
| Arm's length | A lease to the members' business at below-market rent, or rent not actually collected. Non-arm's length dealings can also push fund income into the 45% tax rate: see NALI and NALE |
| Market valuation | A property carried at cost for years, with no supportable valuation evidence |
| Pension minimums not paid | Payment made on 30 June that doesn't clear, or not made at all |
| Investment strategy | Generic strategy, not reviewed, or the fund holds assets the strategy doesn't mention |
| Borrowing | An overdraft, a margin loan, or a related-party loan outside a compliant LRBA |
| Late lodgement and records | Minutes not kept, trustee declarations missing, accounts not prepared on time |
Most of these are avoidable, and most start with fund money and personal money getting mixed. Our guide to related parties and in-house assets explains the rules that cause the bulk of them.
What happens after an auditor contravention report?
The ATO reviews the report and decides what to do, based on the seriousness of the breach, whether it's been fixed, and the trustees' history. The options range widely:
- a letter asking you to fix the breach and confirm it's done
- an education direction to complete an approved course and re-sign the trustee declaration
- a rectification direction, requiring specific steps within a set time
- administrative penalties of between 5 and 60 penalty units, imposed on each individual trustee, or jointly on the directors of a corporate trustee ($364 a unit from 1 July 2026, so up to $21,840 per trustee for the serious ones)
- an enforceable undertaking
- disqualification of a trustee
- making the fund non-complying, which means tax at the top marginal rate on the fund's income and, in that year, on most of its assets
Penalties can't be paid or reimbursed from the fund. If you discover a breach before the auditor reports it, the ATO's early engagement and voluntary disclosure service lets you raise it yourself, which the ATO takes into account when deciding what to do. Fixing a breach quickly and properly is almost always the cheapest option.
How do you prepare for an SMSF audit?
Through the year
- Keep fund money in the fund's own bank account only. Never pay a personal or business bill from it, and never pay fund income into a personal account.
- Hold every asset in the trustees' names as trustee for the fund.
- Minute big decisions as you make them: new investments, pensions, contribution splits, changes of trustee.
- Pay pension minimums and make contributions well before 30 June, not on it.
- Review the investment strategy at least once a year and after big events, and minute the review.
- Tell the ATO within 28 days about changes to trustees, directors, members or contact details.
The audit file checklist
The auditor will ask for most of this. If we're your accountant, we assemble it.
- signed financial statements and member statements
- trust deed and all variations
- trustee declarations and consents for every trustee and director
- minutes for the year, including the investment strategy review
- the investment strategy itself
- bank statements for the full year, and statements from every broker, platform and fund manager
- 30 June market valuations, with evidence for property and unlisted assets
- contribution records, and notices of intent to claim a deduction with the fund's acknowledgements
- pension documents, payment records and transfer balance account reports
- leases, loan agreements, LRBA and bare trust documents
- the actuarial certificate, if the fund needs one
- last year's audit report and any management letter, with evidence that issues raised were fixed
Answering the auditor's questions
Trustees must give the auditor the documents they ask for within 14 days. Slow answers are the most common cause of late audits, and a missed time limit can itself be reportable. If you don't understand a query, ask us; we'll explain it and draft the answer for you to check.
What does an SMSF audit cost, and when is it due?
Cost
The audit is billed by the auditor, separately from the accounting. The fee reflects the work: a fund of cash and listed shares with complete records is quicker to audit than one with property, unlisted assets, a borrowing arrangement or related-party dealings. Missing records and slow responses add cost. Our SMSF costs guide covers how audit fees fit into a fund's total running costs.
Timing
The auditor must be appointed at least 45 days before the annual return's due date, and the audit must be completed before the return is lodged. For most established funds lodging through a tax agent, the 2025–26 return is due on 15 May 2027, so the auditor must be appointed by 31 March 2027. Funds with earlier due dates need earlier audits. Our guide to the SMSF annual return and deadlines has the full list.
How we handle the audit for our SMSF clients
- We prepare the accounts, member statements and minutes, and check the compliance areas the auditor will test, before the file goes anywhere.
- Anything we find, we raise with you first and fix if it can still be fixed.
- We send the complete audit file to an approved independent SMSF auditor.
- We manage the auditor's queries, gathering documents from you by SMS or email so you answer on your phone.
- We explain the audit report and any management letter in plain English, and agree a plan for anything raised.
- We lodge the annual return once the audit is signed.
Our super and SMSF agent runs the pre-audit compliance checks on the draft accounts, such as caps, pension minimums and in-house asset ratios, and a qualified accountant reviews every result before the file goes to the auditor. Our SMSF accountant service explains the rest of what's included.
What audit mistakes should you avoid?
- Treating the audit as the accountant's problem. The trustees are responsible. The auditor reports to the ATO about the trustees.
- Ignoring last year's management letter. An unfixed breach is reportable the following year, whatever its size.
- Leaving valuations to the last minute. Property and unlisted assets need evidence the auditor can rely on.
- Paying pensions on 30 June. If the money doesn't leave the fund that day, the pension may be treated as having stopped. Our SMSF pensions guide covers the minimums.
- Using the fund's money "temporarily". There's no such thing as a short loan to a member.
- Changing auditors to avoid a finding. The auditor's reporting duty applies even if their engagement ends.
Frequently asked questions
Does an SMSF need to be audited if nothing happened during the year?
Yes. Every SMSF must be audited every year, even if it received no contributions and paid no benefits. The audit confirms the fund's assets exist, are valued correctly and are held in the fund's name, and that the fund still meets the rules. A fund with no activity is usually a quick audit, but it isn't optional.
How do I check my auditor is approved?
Approved SMSF auditors are registered with ASIC and have an SMSF auditor number, which must be shown on the fund's annual return. You can search the SMSF auditor register on ASIC's website. If an auditor's registration is cancelled or suspended, the fund needs a new auditor.
Can I choose my own SMSF auditor?
Yes. The trustees appoint the auditor, and you can change auditors from year to year. Most trustees let their accountant coordinate the audit with an independent auditor they work with regularly, which keeps the process quick. Whoever you use must be independent of you and of the firm that prepared the accounts.
What happens if my SMSF fails its audit?
There's no simple pass or fail. The auditor may qualify the financial or compliance opinion, write to the trustees about the issue, and, if the breach meets the ATO's reporting tests, lodge an auditor contravention report. The ATO then decides what to do, from a letter asking you to fix it through to penalties, directions or, for the most serious cases, disqualification or non-complying status.
How long does an SMSF audit take?
It depends almost entirely on the file. A fund with cash and listed shares, complete records and no unusual transactions can be audited quickly once the file is ready. Property, unlisted assets, related-party dealings, missing documents and slow answers to queries all add time. Trustees must provide requested documents within 14 days.
Does the auditor check whether my investments are good?
No. The auditor checks that investments are allowed, properly recorded, held in the fund's name, valued at market value and consistent with the investment strategy. Whether they were wise investments is not the auditor's question. That's between you and your financial adviser.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.