Australia: Self Managed Super Fund Update: Auditor Registration Requirements

Last Updated: 25 August 2012
Article by Andrew O'Bryan, Mark Payne and Rebecca James


One of the key recommendations of the Cooper Review into superannuation related to self managed superannuation fund (SMSF) auditor registration.

The Regulatory Impact Statement into this measure stated that:

"SMSF auditor registration seeks to ensure that SMSF auditors have a minimum level of competency to perform SMSF audits, and can be relied upon to detect and report contraventions of the SIS legislation. However, implementation of this measure involves a trade-off between creating a level-playing field for SMSF auditors and minimising the compliance burden on highly competent auditors."

The importance of SMSF auditors arises from the strong growth in the SMSF area and in particular:

  • At 30 June 2011, there were almost 460,000 SMSFs, representing 99 per cent of all superannuation funds. SMSFs hold over $418 billion or 31.2 per cent of total superannuation assets ($1.34 trillion).1
  • The SMSF sector is also the fastest growing superannuation sector. The average asset balance of an SMSF has grown from around $476,000 in June 2004 to $888,000 in June 2010. In June 2004, 42.4 per cent of SMSFs had an asset value of less than $200,000 compared to only 24.2 per cent of all SMSFs in June 2010.2

The ATO simply does not have the resources to audit the almost half a million funds and must rely on the profession to protect the integrity of the SMSF system.

Proposed legislation

Following through on these recommedations, on 23 June 2012 the Minister for Financial Services and Superannuation, Bill Shorten, announced further details of self managed superannuation fund auditor registration.

The draft legislation, Superannuation Legislation Amendment (Stronger Super and Other Measures) Bill (No. 2) 2012: SMSF auditor registration will require auditors will need to meet the following requirements to be registered as a self managed superannuation fund auditor:

  • be an Australian resident;
  • hold a tertiary accounting qualification that includes an audit component or have successfully completed study in audit as part of a professional accounting body program;
  • meet a fit and proper test;
  • hold professional indemnity insurance;
  • subject to transitional arrangements, have 300 hours of self managed superannuation fund audit experience in the three years prior to registration; and
  • subject to transitional arrangements, pass a competency exam.

The phrase, 'fit and proper person' is not defined in the proposed legislation. However, the Explanatory Memorandum at paragraph 1.28 sets out a number of relevant considerations as follows:

  • whether the applicant has been found to be dishonest in any other role;
  • whether the applicant has been disqualified or deregistered from any other role, such as the trustee of a SMSF;
  • whether the applicant has serviced a term of imprisonment;
  • whether the applicant was or is an undischarged bankrupt; and
  • whether the applicant has been convicted of an offence involving fraud or dishonesty.

Auditors will be able to apply for registration from 31 January 2013 and must be registered with Australian Securities and Investments Commission (ASIC) by 1 July 2013 to conduct self managed superannuation fund audits after this time. Auditors required to sit the competency exam can do so from 1 July 2013 and will have until 30 June 2014 to complete the exam and become fully registered.

The competency exam will be developed by ASIC in consultation with industry. An auditor will not be eligible for that year if they fail to pass the competency exam twice within a twelve month period.

In addition, the regulator may cancel an auditor's registration if they have not carried out any significant auditing work within a continuous five year period. In coming to their decision, ASIC may consider the following factors:

  • the number of SMSF audits undertaken; and
  • the value and nature of the SMSF's assets and arrangements as an indicator of the type of work and knowledge exercised by the auditor.

The regulator will keep a register of both approved and disqualified SMSF auditors. The regulation of auditors will be shared between ASIC and the Commissioner of Taxation.

From 31 January 2013, SMSF trustees will be required to appoint an approved auditor to provide the audit report needed each year under superannuation law. The audit report must be in the approved form and make a declaration as to the auditor's compliance with the auditor independence requirements in section 128F(d) of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Transitional arrangements

Transitional arrangements have been developed which recognise highly experienced and competent auditors. Auditors who sign off on 20 or more audits in the 12 month period prior to applying for registration will not be required to sit a competency exam to become registered as a self managed superannuation fund auditor.

Additionally, existing self managed superannuation fund auditors who have signed off a self managed superannuation fund audit within a 12 month period will be exempt from the hours based experience requirement when registering.

Ongoing requirements.

Registered auditors will be required to meet ongoing professional obligations including:

  • undertaking a minimum amount of Continuing Professional Development training every three years;
  • holding professional indemnity insurance at an appropriate level;
  • complying with auditing and assurance standards prescribed by the Auditing and Assurance Stands Board;
  • complying with the Accounting Professional and Ethical Standards Board's APES 110 – Code of Ethics for Professional Accountants; and
  • providing the regulator with an annual statement within 30 days of the anniversary of their registration confirming the number of audits undertaken or signed and indicating whether the auditor has adhered to independence standards.

Auditors will be required to pay the fees specified in the Superannuation (Self Managed Superannuation Fund Auditors) Fees Imposition Act 2012 for applying for registration, undertaking the competency exam, providing the regulator with the required annual statement and advising the regulator of any change in circumstances.

Legislative objectives

The Australian Taxation Office's 2009 compliance activities identified that in approximately 29% of cases the SMSF's accountant was also auditing the SMSF despite having prepared a material part of the SMSF's financial statements. On this basis, the Government has determined that there is a serious risk of a conflict of interest occurring in relation to almost one third of all SMSFs.

The aim of the legislation is to ensure that the rapidly growing SMSF space is being managed appropriately by further regulating the competency standards and professional qualifications of the auditors of SMSFs.

The primary focus of the legislation is threefold:

  • improve the independence of auditors and thus, aim to eliminate conflicts of interest;
  • impose minimum competency standards; and
  • introduce a consistent approach to enforcement action where required.

While the effectiveness of the proposed legislation in meeting these three aims cannot be determined until the legislation has been implemented and in operation for a sufficient period of time, the provisions predominately address the introduction of minimum competency standards and a systematic approach to enforcement actions. It is unclear at this stage how the provisions will ensure auditors are independent and thus, remove any actual or potential conflicts of interest. As currently drafted, the provisions simply require a declaration from an auditor as to their compliance with the independence standards contained within the SIS Act.

The broad brushstroke approach to the legislative provisions gives the regulator wide and all encompassing powers to determine competency standards for various situations or activities. In addition, ASIC is not limited as to the nature or type of conditions that may be placed on an auditor's registration. Any limitations will be determined on a case by case basis. This may give rise to complaints that auditors in similar circumstances are being treated unequally where different conditions are imposed on each auditor. However, a transparent approval process may elevate this issue.

Importantly, the draft provisions confer a wide discretion on the regulators to impose conditions on a case by case basis which may make it difficult for auditors to comply with the approved auditor requirements. In addition, the requirements under the draft legislation coupled with the wide discretion of the regulators may hinder the effectiveness of the legislation.

If the draft legislation is implemented in its current form, the efficient and effective implementation of the provisions will depend to a large extent on the approach adopted by the regulators, ASIC and the Commissioner of Taxation, in administering their respective jurisdiction over SMSF auditors and managing the division of power.


1 APRA Quarterly Superannuation Bulletin June 2011, p. 7, Available:

2 ATO SMSF Statistical Report June 2011, Available:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.