When your SMSF auditor reports you to the ATO: the contravention report tests, the 5% and $30,000 thresholds

Every SMSF is audited annually, and the auditor does not just give an opinion: in some cases they must also lodge an auditor contravention report (ACR) with the ATO. Trustees often assume small slip-ups stay between them and the auditor. Sometimes that is true, and sometimes it isn't. This article explains the seven reporting tests in the ATO's "Reporting criteria" page (last updated 11 March 2025, read on 19 October 2026). The tests are written for auditors, and they apply to the contraventions listed in the ATO's tables of reportable sections and regulations; this article is general information, not a substitute for your auditor's judgement.

The starting point

The ATO's compliance audit page says that if an auditor forms the opinion that a contravention of a matter in the ACR may have occurred, is occurring or may occur in future, they must notify the trustee in writing and report it to the ATO in the ACR. The reporting criteria then set out which contraventions meet the bar. See our article on what the SMSF auditor checks.

The tests, in order

Test 1: fund definition. If the fund fails the section 17A definition of an SMSF, the auditor can report it. The ATO says it wants to hear about it because it may be able to help trustees avoid serious consequences, including loss of complying status. A contravention of section 126K, which stops disqualified persons being trustees or directors of a corporate trustee, is also reported because the ATO describes it as serious. See what makes a fund an SMSF and trustee disqualification.

Test 2: new fund. If the fund is less than 15 months old at the end of the financial year and any single contravention exceeds $2,000, the auditor reports all contraventions of the listed sections and regulations, regardless of the financial thresholds, and applies no further tests. The 15 months runs from the establishment date, which is generally the date the fund first holds any assets.

Test 3: repeat behaviour. The auditor must report a contravention where the trustees were previously advised of a contravention and then breached the same section or regulation again, even if it doesn't meet the financial thresholds. The ATO's example is trustees who received advice from the previous year's working papers.

Test 4: unrectified breach. The auditor must report a contravention where one identified in a previous financial year hasn't been rectified at the time of the current audit.

Test 5: missed statutory deadlines. For reportable sections and regulations that have a statutory time period, if the trustees fail to meet it by more than 14 days, the contraventions are reported. This is why prompt responses matter, such as the 14-day period for giving the auditor documents.

Test 6: more than 5% of total assets. If the value of all contraventions is more than 5% of the fund's total assets, the identified contraventions are reported. The ATO's example: a fund with $250,000 of assets acquires a $25,000 asset from a related party in breach of section 66. That is 10% of total assets, so it must be reported. For a breach of the in-house asset acquisition rule in section 83, the contravention value is only the amount over the 5% limit, so a fund with 7% in-house assets has a 2% contravention value, which does not exceed 5% of total assets.

Test 7: more than $30,000. If the value of all contraventions of a section or regulation in the listed tables is more than $30,000, all identified contraventions are reported.

Judgement and extra reporting

The ATO says the tests are a minimum. Auditors must follow the auditing and assurance standards and use professional judgement, and they are encouraged to report other contraventions or information that helps the ATO even if no test is met, in Section G of the form. Where an auditor can't determine the value of a contravention, for example because they lack evidence the assets were valued at market value (regulation 8.02B), they may use professional judgement on whether the financial thresholds could be met and, where appropriate, report. See our article on SMSF asset valuation.

What this means for trustees

• A contravention does not need to be large to be reported if the fund is new, the breach is a repeat, it wasn't fixed, or a deadline was missed by more than 14 days.
• Fix problems when the auditor raises them, and keep the evidence; an unfixed breach carries into the next audit.
• Related-party deals and in-house assets can cross the 5% threshold quickly. See buying assets from related parties and the 5% in-house asset rule.
• SuperStream rollover breaches are reportable under regulation 6.17 if the ACR criteria are met; see SMSF rollovers.
• The ATO's tests don't change the separate question of whether the auditor must qualify their audit opinion.

Worked example

Illustrative only, not personal advice.

Sam and Lee's SMSF has $800,000 in assets. At audit, the auditor finds that the fund bought $60,000 of shares from Lee's brother, a related party, and the shares were not an exception to the section 66 prohibition. The contravention value is 7.5% of total assets and more than $30,000, so it meets the thresholds and must be reported, with a written notice to the trustees. Separately, the fund's bank account was not in the trustees' names "as trustee for" the fund in the previous year, and nothing was changed; because an earlier contravention was not rectified, the auditor must also report that one under the unrectified-breach test even though it has no dollar value. Had the trustees fixed the account name after the previous audit, only the share purchase would have been reported.

Sources

• ATO — Auditor/actuary contravention report instructions: Reporting criteria
• ATO — Compliance audit of an SMSF