What Does an SMSF Auditor Look For?
Every SMSF in Australia needs to be audited each year.
This is not optional. It’s part of how the system works.
But for many people, this is where uncertainty comes in.
What does the auditor actually look at? And what are they trying to check?
In practice, the audit is not about catching you out.
It’s about making sure your SMSF is operating the way it’s meant to.
This guide walks you through what auditors typically review, so you know what to expect.
Why SMSF audits exist
Before getting into the details, it helps to understand the purpose.
An SMSF audit is there to confirm that:
the fund is being managed correctly
trustees are meeting their responsibilities
transactions follow superannuation rules
The audit is completed each year before your SMSF annual return is lodged with the Australian Taxation Office (ATO).
The two parts of an SMSF audit
An SMSF audit has two main parts.
1. Financial audit
This part looks at the numbers.
The auditor checks whether your financial statements are accurate.
This includes:
income, such as rent or dividends
expenses
asset values
bank balances
2. Compliance audit
This is where most issues are identified.
The auditor looks at whether your SMSF is operating within superannuation law.
What auditors actually focus on
Let’s walk through the key areas.
The purpose of the fund
Your SMSF needs to exist for one reason.
To provide retirement benefits.
The auditor will look for anything that suggests otherwise.
For example:
personal use of SMSF assets
transactions that benefit members outside of retirement
Your investment strategy
Your SMSF should have a documented investment strategy.
The auditor checks:
whether it exists
whether it reflects what you’re actually doing
whether it considers things like risk and cash flow
This is not just a document to have on file. It needs to connect to your decisions.
Asset ownership and separation
SMSF assets need to be held correctly.
And they need to be separate from your personal assets.
The auditor will check:
how property is held
how bank accounts are set up
whether names match the structure
This is one of the more common areas where issues come up.
Related party transactions
Transactions involving related parties are looked at closely.
The auditor checks:
whether the transaction is allowed
whether it is done at market value
This applies to things like rent, purchases, and arrangements within the fund.
Property inside the SMSF
If your SMSF owns property, this will be reviewed carefully.
The auditor will look at:
how the property is being used
lease agreements where relevant
whether rent reflects market rates
whether any related party is using the property
This is an area the ATO pays close attention to.
Borrowing arrangements (if applicable)
If your SMSF has borrowed to purchase property, the structure is reviewed.
This includes:
whether the LRBA is set up correctly
whether the holding trust is in place
whether loan terms reflect market conditions
whether the property has been altered in a way that breaches the rules
Contributions and rollovers
The auditor also reviews how money enters the fund.
This includes:
contributions made during the year
whether contribution limits may be exceeded
how rollovers are recorded
Payments and withdrawals
If money is taken out of the fund, this is checked carefully.
The auditor looks at:
whether the payment is allowed
whether conditions of release are met
Incorrect withdrawals are a common issue.
Documentation and records
This ties everything together.
Your SMSF needs to maintain proper records.
The auditor will look for:
trustee decisions and resolutions
financial records
supporting documents
lease and loan agreements
Missing or incomplete documentation is one of the most common audit findings.
Where issues usually come up
In practice, most issues are not intentional.
They usually come from things like:
outdated or missing investment strategies
incorrect asset ownership
incomplete documentation
transactions not reflecting market value
misunderstanding how property rules work
borrowing structures not set up correctly
These are the areas the ATO continues to focus on.
What happens if something is not right
If an issue is identified:
it may be reported to the ATO
the trustee may need to fix it
penalties may apply depending on the situation
Not every issue leads to penalties, but it does need to be addressed.
Why being prepared makes a difference
When your SMSF is set up and maintained properly:
the audit process is smoother
reporting is more straightforward
risks are lower
A well-managed SMSF is easier to audit.
How we can help
We focus on SMSF setup and compliance.
This includes:
preparing SMSF borrowing documentation
setting up LRBA and holding trust structures
making sure everything aligns before the transaction
supporting ongoing compliance and reporting
If you’d like to understand what this would look like in your situation, you can speak with our team.
Ruby He
Ruby He is the founder of Real Accounting, a specialist firm focused on SMSF setup and SMSF Setup and Compliance.
With years of experience working with business owners and investors, she helps clients navigate SMSF structures with clarity, ensuring compliance while unlocking opportunities to invest in property through super.
Ruby is known for her practical, no-nonsense approach, simplifying complex regulations into clear, actionable steps. Clients value her guidance in structuring SMSFs correctly and her track record of supporting successful property investments within super.
Thinking of using your super to invest in property? Have a chat with Real Accounting.
Disclaimer
Real Accounting does not hold an Australian Financial Services Licence (AFSL) and does not provide financial product advice.
This article contains general information only and does not take into account your objectives, financial situation, or needs.
Before establishing an SMSF or implementing any borrowing arrangement, you may wish to seek advice from a licensed financial adviser to assess whether it is appropriate for your circumstances.
