The independent audit is a core requirement of running a self-managed super fund, but it is receiving increased attention as the ATO focuses on SMSF auditor compliance priorities for 2026–27.

The ATO has highlighted auditor independence, high-risk auditors and high-volume auditors as areas of focus. At the same time, the Auditor Contravention Report (ACR) process means issues identified during an audit can lead to further regulatory attention.

For trustees, understanding how the annual audit connects with broader ATO compliance processes helps explain why maintaining accurate records and proper governance remains important.

The audit and its reporting role

Every SMSF must undergo an annual audit by an ASIC-registered SMSF auditor before lodging its annual return.

The auditor reviews the fund’s financial statements and assesses compliance with relevant Superannuation laws. The auditor must also maintain independence when performing the audit.

The audit process is not simply a private review between the Trustee and auditor.

Where an auditor identifies certain reportable contraventions, they must lodge an Auditor Contravention Report with the ATO.

This reporting requirement connects the annual audit process with the regulator’s broader compliance activities.

Why independence is under the spotlight

Auditor independence is a central part of the ATO’s 2026–27 SMSF auditor compliance focus.

SMSF auditors must follow professional independence standards, and concerns may arise where the same practitioner provides both audit and certain non-audit services to the same fund.

The purpose of independence requirements is to ensure auditors can assess a fund objectively.

The ATO has also indicated attention towards high-risk auditors, high-volume auditors and newly registered auditors.

For trustees, the practical takeaway is that selecting and maintaining an appropriately independent audit arrangement supports the integrity of the fund’s compliance process.

What a contravention report can trigger

When an auditor identifies a reportable breach and lodges an ACR, the matter becomes visible to the ATO.

The regulator has several compliance Options depending on the circumstances and seriousness of the issue.

These may include:

  • education directions requiring trustees to complete approved learning;
  • rectification directions requiring a breach to be corrected;
  • enforceable undertakings;
  • administrative penalties;
  • trustee disqualification;
  • making an SMSF non-compliant in serious cases.

Administrative penalties are calculated using penalty units, currently valued at $330 each, and may range from 5 to 60 penalty units per contravention.

For example, failing to prepare financial statements attracts 10 penalty units, while certain serious breaches such as prohibited lending to members, unlawful borrowing or in-house asset breaches may attract 60 penalty units.

Penalties must generally be paid personally by trustees rather than from SMSF assets.

Where a fund has individual trustees, penalties may apply separately to each trustee, meaning a two-member fund may face a higher combined penalty than a fund with a corporate trustee structure.

The contraventions most often reported

Understanding common contraventions helps trustees identify areas requiring attention.

Frequently reported issues include:

  • loans or financial assistance to members;
  • in-house asset breaches;
  • failures to keep fund Assets separate from personal assets.

These issues often arise from everyday arrangements that were not properly assessed against superannuation rules.

Examples include lending fund money to a member, holding assets incorrectly, or failing to maintain clear separation between personal and SMSF transactions.

Because these areas are common sources of breaches, they remain important areas for trustee attention.

What trustees should check and understand

Trustees should approach the annual audit as a genuine compliance review rather than a routine formality.

Useful checks include:

  • maintaining complete financial and transaction records;
  • ensuring assets are held correctly by the fund or trustee structure;
  • documenting trustee decisions through appropriate records;
  • confirming Investment and related-party arrangements comply with superannuation rules.

Trustees should also consider the independence of their chosen auditor and whether any arrangements could affect the auditor’s objectivity.

Where a transaction or investment arrangement is uncertain, obtaining advice before completing it may help prevent a compliance issue from arising later.

Common mistakes to avoid

One common mistake is assuming an audit will automatically be straightforward without preparing supporting records.

Another is overlooking rules relating to related-party transactions, in-house assets and separation of fund assets.

Some trustees also assume that once an issue is identified it will not progress further. However, auditors have obligations to report certain contraventions through the ACR process.

Maintaining good records and addressing issues early can help reduce avoidable complications.

What to watch next

The ATO reviews SMSF auditor compliance priorities each year, meaning areas of focus may evolve over time.

Trustees can continue monitoring how auditor independence requirements are applied and ensure their fund’s records and governance processes remain current.

Key Insights

SMSF audits are receiving increased attention because the ATO is focusing on auditor independence, higher-risk audit activity and the reporting pathway created through Auditor Contravention Reports.

The audit process itself has not changed, but the importance of accurate records, compliant arrangements and independent oversight remains high.

Trustees who maintain proper documentation, understand their obligations and support a robust audit process are better placed to manage SMSF compliance requirements.