The SMSF Association recently released In conversation with the ATO – SMSF Auditor Edition, a recorded interview with Kellie Grant, Director of the ATO’s SMSF Regulatory Branch.
Every year the ATO shares insights from its SMSF auditor review program, but this discussion provided unusually detailed insight into what the ATO is seeing across SMSF audits, where audit files are falling short and the issues that will matter most in 2026-27.
While the session was aimed at auditors, its practical insights are equally valuable for accountants, financial advisers and SMSF specialists. They provide a useful guide to the evidence auditors will need in the current audit season, and where earlier action in the audit planning and preparation stages can help avoid unnecessary queries, delays or reportable contraventions.
Key ATO Insights
In 2025-26, the ATO received 30,135 Auditor Contravention Reports covering 59,603 contraventions. The number of SMSFs with an ACR increased by 23.9%, driven largely by improved reporting of administrative breaches.
The most frequently reported compliance issues were:
- Loans to members: 18.2%
- In-house assets: 14.7%
- Separation of assets: 12.5%
- Administrative contraventions: 4.9%
The ATO is not concerned that auditors are over-reporting; rather it is concerned that some matters may still be under-reported – particularly where the market value requirements in SIS Regulation 8.02B have not been properly considered.
The message for practitioners is clear: audit files must contain robust, supportable evidence of an asset’s existence, ownership and market value.
Kellie also highlighted emerging areas that warrant attention now. More than 13,000 SMSFs were registered between the 24 June LRBA announcement and the changes taking effect on 10 August, and the ATO will be monitoring this cohort closely. For advisers supporting these funds, it will be important to ensure the establishment, borrowing, title and supporting documentation tell a clear and complete story from the outset.
Crypto and digital assets are another developing focus. The ATO advised that further audit guidance is currently in development, but its expectations are already clear: holding statements and spreadsheets alone will not be enough. Auditors will need robust, independently verifiable evidence of wallet balances, transactions, ownership and year-end values.
Auditor independence remains firmly on the ATO’s 2026-27 agenda, including planned reviews of in-house audits and reciprocal audit arrangements. Kellie also highlighted two less obvious risks: fee dependency and long-standing referral arrangements, particularly where those arrangements have not been recognised, documented and appropriately safeguarded.
Finally, the ATO continues to focus on funds that do not lodge, or lodge late. In practice, these delays often arise when valuation questions, incomplete records or potential compliance issues are identified too late in the audit process.
With the ATO’s regulatory focus for 2026-27 in mind, here are six practical areas worth addressing before submitting a fund for audit this year.
1. Start valuations early
Market valuations remain firmly in the ATO’s sights, particularly where values have not changed for several years or the supporting evidence is weak. Kellie’s comments reinforced that market value is not a year-end formality; it is a core part of the audit evidence framework, especially where it affects broader regulatory and tax outcomes.
For property, a formal independent valuation is not always required. A current report from a reputable online valuation provider, supported where possible by comparable sales or other objective market evidence, can be a practical and efficient starting point. The key is to retain the report, note the valuation date and ensure the evidence is robust.
For unlisted entities or other difficult to value assets, a more tailored approach is usually needed. A clear explanation of the process undertaken and the valuation methodology applied is very useful for the auditor.
2. Make ownership and existence easy to verify
The ATO’s concern is not limited to value. Audit files must also show that an asset exists and is legally owned by the SMSF.
This is especially important for bank accounts, property, private loans, unlisted investments, platform holdings, and digital assets. A good working test is whether an independent third party could look at the file and clearly understand what the fund owns, the current legal title, and why the reported value is supportable.
3. Treat trustee records as core audit evidence
Administrative documents can seem routine until they are missing. Kellie’s comments around trustee declarations were a useful reminder that incomplete or late trustee records can still create reportable contraventions.
Where trustees or directors change, make sure the file is updated promptly with signed trustee declarations, appointment and resignation documents, minutes and any related ASIC or fund records. This is one of the simplest areas to get right early and one of the most frustrating to repair later.
4. Where related parties are involved, greater scrutiny follows
The ATO data shows that loans to members remain the largest reported contravention category, alongside in-house assets and separation of assets breaches.
Where a fund has a related party acquisition, investment, loan, lease or other arrangement, do not assume that an executed agreement or year-end balance will be enough. The evidence should clearly establish who the parties are, the nature of the arrangement, the terms agreed, the documentation executed and the actual transactions that occurred. This includes evidence of payments, interest, rent, security, valuations and any other information needed to support that the arrangement is permitted, properly documented and conducted on arm’s-length terms.
5. Understand the evolving challenges with complex and digital assets
Kellie’s comments on crypto and digital assets were particularly important because they foreshadow further ATO guidance while already making clear that the evidence standard is high.
Holding statements and spreadsheets alone will not be enough. Auditors will be looking for independently verifiable evidence of ownership, wallet balances, transactions and year-end values. The same mindset should be applied to unlisted and hard-to-value assets more broadly: complex assets require more detailed records, clearer explanations and stronger third-party support.
6. Engage early
The clearest thread running through the ATO’s comments is the importance of addressing issues before audit deadlines narrow the available options. This is especially important where a fund has:
- Recently been established
- Entered a new or unusual investment arrangement
- Acquired property through an LRBA
- Dealt with a related party
- Invested in crypto, digital assets or unlisted entities
- Changed trustees or directors
- Used the same valuation for several years
A quick pre-audit check
Before submitting the audit, consider whether the file includes:
- Final signed financial statements and complete accounting records
- Current valuation evidence for material assets
- Proof of ownership and any security or charge over assets
- Trustee declarations, minutes and appointment records
- Executed loan, lease, LRBA and related-party agreements
- Evidence of rent, interest, repayments and arms-length terms
- Additional transaction, ownership and pricing evidence for crypto or digital assets
- Details of any identified issue and action already taken
Key takeaway for smoother audits in 2026-27
The ATO’s latest insights go beyond broad compliance messages. They provide practical examples of how evidence gaps, outdated valuations and incomplete records can create real audit and reporting issues.
The most effective way to prepare is not to anticipate every possible audit query. An audit-ready file tells a clear, complete and supportable story – one that can be readily understood by an independent third party.
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