SMSF auditor independence: what the 2021 changes mean for trustees today

For trustees of self-managed superannuation funds, one of the structural changes in the SMSF compliance framework over the last several years has been the tightening of auditor independence requirements. Before 2021, a common arrangement was for a single accounting firm to provide both the SMSF's accounting work (preparing financial statements, lodging the annual return) and the annual independent audit. The arrangement was efficient — one firm, one relationship, one fee — and was widespread in the SMSF sector. It was also problematic from a professional independence perspective: the auditor's role is to provide truly external assurance, and when the same firm did both, the audit became in part a review of the firm's own work. The 2021 amendments to APES 110 (the Code of Ethics for Professional Accountants, issued by the Accounting Professional & Ethical Standards Board) effectively ended the practice. Most SMSFs have now navigated the transition to a two-firm structure. For trustees who haven't, the existing arrangement may not satisfy current independence requirements — worth confirming.

The annual audit is a foundational SMSF compliance requirement. Under the Superannuation Industry (Supervision) Act 1993, every SMSF must undergo an annual independent audit performed by an approved SMSF auditor (registered with ASIC). The audit covers two distinct elements. The financial audit confirms that the SMSF's financial statements present a true and fair view of the fund's position. The compliance audit confirms that the SMSF has met its regulatory requirements during the year — sole purpose test, contribution caps, in-house asset rules, related-party rules, investment strategy compliance, member benefit rules, and others. The auditor's report includes any contraventions identified, which may be reported to the ATO depending on size, materiality, and persistence.

Pre-2021, the prevailing practice for many SMSFs was for one accounting firm to handle both functions. The arrangement worked because the firm already had detailed knowledge of the SMSF's transactions through the accounting work — the audit could be performed efficiently with that existing knowledge. The 2021 APES 110 amendments tightened the rules and effectively ended the practice, on the basis that the "self-review" threat to auditor independence was real and unacceptable. Under the new framework, the same firm cannot both prepare the SMSF financial statements and audit them. A firm wishing to continue providing both services must structurally separate the accounting and audit functions — different teams, different leadership, robust internal controls. For smaller firms, this is impractical; for larger firms with separate audit divisions, it can work, but the structural separation must be genuine.

For trustees, the practical impact has been twofold. The first is two firms instead of one. Most SMSFs now use a separate accounting firm and an independent audit firm. The trustee deals with each separately for their respective work, with coordination becoming the trustee's responsibility (or the adviser's, on the trustee's behalf). The second is higher overall cost. Two separate firms typically cost more than a single firm doing both. SMSF audit fees are generally in the $400 to $1,500 range depending on complexity, on top of the accounting cost. The cost increase varies but is rarely material in absolute terms.

The trade-off is better audit independence. The audit is genuinely external — the auditor has no relationship with the accounting work and provides truly independent assurance. For most trustees, the quality benefit is real, even if the cost is higher. The audit findings, when raised, are based on the auditor's own analysis rather than influenced by the firm's prior involvement.

For trustees still using a single firm for both functions in 2026, the arrangement may not satisfy current independence requirements. The firm should be able to confirm whether they have appropriate internal separation (a separate audit division with proper independence safeguards) or whether the SMSF needs to engage an external auditor. For most smaller SMSFs, the answer is that an external auditor is the appropriate path. The transition is not difficult — it involves identifying a suitable external auditor, providing them with the SMSF's records, and incorporating their work into the annual compliance cycle.

Choosing an external auditor involves several considerations. The auditor must be a registered SMSF auditor with ASIC; this can be verified on the ASIC public register. SMSF audit is a specialised area; auditors with SMSF-specific practice are typically more efficient and cost-effective than general practitioners. Service quality — responsiveness, communication, willingness to address queries promptly — matters as much as the formal audit work. Fees vary, and obtaining quotes from multiple auditors is sensible. Some larger accounting firms have separate audit divisions that can provide truly independent audit; standalone audit firms are also widely available.

For trustees, the audit is also an opportunity to identify and address compliance issues before they become serious. Common audit findings include investment strategy not documented or out of date, in-house asset rule breaches (investments or loans to related parties exceeding the 5% in-house asset limit), related-party transaction issues, contribution cap breaches, pension minimum drawdown failures, and trustee documentation gaps. For SMSFs with active investments and ongoing complexity, working with an audit-aware accountant (and increasingly, an audit-aware adviser) reduces the risk of contraventions emerging in the annual audit.

Trustee responsibilities under the new framework are unchanged in form but more formally enforced. Maintaining proper records (investment evidence, minutes, member declarations, contribution records) is essential. Engaging the auditor early — typically before year-end, allowing time for the audit to be completed before the ATO lodgement deadline — avoids tight timelines that compress the work. Providing information promptly, addressing auditor queries within days rather than weeks, and addressing any contraventions identified are all part of the trustee's role. Where the trustee relies on an adviser to coordinate, the formal responsibility remains the trustee's, but the practical work is shared.

A few common pitfalls are worth flagging. Treating the audit as a formality rather than a substantive independent check produces real compliance risk. Engaging the auditor too late in the cycle compresses the work and introduces errors. Ignoring auditor queries can escalate to ATO reporting. Continuing the pre-2021 single-firm arrangement without proper structural separation may not satisfy current independence requirements. And underestimating cost — budgeting for the single-firm fee when two-firm arrangements are typical — produces an unwelcome surprise at audit time.

For SMSF trustees, the auditor relationship is one of the more important compliance relationships in the fund. Working constructively with an independent auditor, addressing issues promptly, and treating the audit as a quality check rather than a hurdle produces both better compliance and a better fund.