ASIC reviewed 100 files where Australians were advised to set up an SMSF. In 62, the adviser failed to demonstrate compliance with the best interests duty. In 27 of those, ASIC raised significant concerns about client detriment.
That review was aimed at advisers and licensees. But poor establishment advice does not disappear after the fund is registered. It leaves behind weak records, weak structures and weak audit evidence.
Your auditor is not re-assessing whether the original advice was good. But every year, they test the fund records and compliance evidence that may have been shaped by that advice: the investment strategy, trustee records, valuations, borrowing documents and related party dealings.
With 30 June approaching and the 2025-26 audit cycle to follow, the connection matters.
Key Takeaways
- ASIC’s Report 824 examined 100 SMSF establishment advice files. In 62 files, advisers failed to demonstrate compliance with the best interests duty. In 27 files, ASIC raised significant concerns about client detriment.
- The sample was risk-based and deliberately targeted at higher-risk files. The 62% figure does not represent the overall standard of SMSF advice in Australia.
- The three recurring failures ASIC identified - “control” without substance, order-taking without comparison, and conflicts of interest around property - can leave documentation gaps that persist long after a fund is established.
- These documentation gaps sit in the same areas your SMSF auditor tests every year: investment strategy, trustee records, asset valuations and borrowing arrangements.
- Regardless of how your fund was set up, strengthening these records before 30 June is the most practical response to both ASIC’s findings and the ATO’s stated compliance priorities for 2025-26.
Contents
- ASIC’s SMSF establishment advice review findings
- Three recurring advice failures ASIC identified
- Annual SMSF audit checks that overlap with ASIC’s findings
- The link between ASIC’s findings and annual audit evidence
- Worked example: property, LRBA and weak audit records
- Records to review before 30 June 2026
- Frequently Asked Questions
ASIC’s SMSF establishment advice review findings
In November 2025, ASIC published Report 824, a targeted review of SMSF establishment advice. It examined 100 client files across 27 financial advisers and 12 advice licensees. The advice was provided between May 2023 and April 2024, during a period in which the ATO recorded 41,980 new SMSF establishments in the year to June 2025.
The results were striking.
| Outcome | Number of files |
|---|---|
| Compliant with best interests duty | 38 |
| Non-compliant with best interests duty | 62 |
| Significant concerns about client detriment | 27 of the 62 |
| Conflicts of interest identified | 24 of the 27 |
Source: ASIC Report 824, November 2025.
Two things to keep in mind when reading these figures.
First, ASIC’s sample was risk-based and deliberately targeted at higher-risk files. The regulator used misconduct reports, dispute resolution data and public information to select files where poor advice was suspected. The 62% failure rate reflects that targeted sample, not the overall standard of SMSF advice across Australia.
Second, even if your fund was set up properly, the areas ASIC flagged as weak are the same areas the ATO has listed as audit priorities for 2025-26. The findings matter less for what they say about your adviser and more for what they reveal about where auditors are looking right now.
For a broader setup context, see our SMSF Setup Guide. For the annual review process, see the SMSF Audit Guide.
Three recurring advice failures ASIC identified
Report 824 identified three recurring failures in SMSF establishment advice. Each one can leave documentation weaknesses that persist long after the fund is up and running.
1. The “control” justification without substance
Advisers recommended SMSFs on the basis that clients wanted “more control” over their retirement savings, without exploring what control actually meant to the client, whether an SMSF was the right structure to deliver it, or whether the client understood the obligations of being a trustee. No genuine comparison with industry or retail fund alternatives had been conducted.
What this leaves behind. If the establishment decision was not properly grounded in the client’s circumstances, the investment strategy and governance documentation that followed may not have been either. A generic investment strategy built from a template can become an audit problem if it does not reflect the fund’s actual asset mix, liquidity needs, risk profile or insurance considerations.
2. Acting as order-takers
Rather than conducting a genuine assessment of whether an SMSF was suitable, some advisers simply processed the client’s request. ASIC found these advisers failed to investigate or compare alternative products.
What this leaves behind. If the reasoning behind the SMSF was never properly documented, the trustee records may be thin from the beginning. That does not automatically create a breach, but it can make it harder to demonstrate that later decisions, including the investment strategy and asset selection, were made deliberately and in line with the fund’s circumstances.
3. Conflicts of interest, particularly around property
In 24 of the 27 files raising significant client detriment concerns, ASIC found the adviser failed to prioritise the client’s interests. The most common pattern was advice to establish an SMSF specifically to acquire off-the-plan properties through limited recourse borrowing arrangements, where the adviser or their associates had a financial interest in the transaction.
What this leaves behind. The compliance exposure may continue after establishment. The fund may need to retain clear evidence that the borrowing structure, bare trust documentation, loan terms, asset ownership records, valuations and trustee resolutions are all consistent with the SIS Act investment restrictions and arm’s length requirements.
If the original structuring was driven by a conflicted adviser, that evidence may not be as strong as it needs to be. The SMSF Property Guide covers the main property and LRBA compliance rules trustees should understand.
Annual SMSF audit checks that overlap with ASIC’s findings
Every SMSF must be audited annually by an ASIC-registered independent auditor before the fund’s annual return can be lodged with the ATO. The audit has two parts: a financial audit of the fund’s statements and a compliance audit against superannuation law.
The compliance audit covers a wide range of requirements. The key areas relevant to ASIC’s findings include:
Investment strategy. The auditor must check that the fund has a documented investment strategy and that it has been reviewed. The ATO expects the strategy to reflect the fund’s actual circumstances, not a generic template. It should cover investment objectives, risk profile, diversification, liquidity needs and whether insurance for members has been considered.
Asset valuations. All fund assets must be valued at market value as at 30 June each year. For listed shares and managed funds, this is straightforward. For property, unlisted investments and collectibles, the ATO requires trustees to retain objective, supportable evidence of how the valuation was determined. The ATO has flagged over 16,000 SMSFs that reported the same value for a property or unlisted investment for three consecutive years.
Borrowing arrangements and related party transactions. If the fund holds assets acquired through an LRBA, the auditor must verify that the arrangement complies with the borrowing rules, that loan terms are arm’s length, and that the asset is held in the correct structure. The auditor must also check whether the fund has made prohibited loans to members or relatives, whether related party acquisitions were at market value, and whether in-house assets remain below 5% of total fund assets.
Trustee records and governing documents. The auditor checks that the trust deed is current, trustee declarations are in place, and the fund meets the definition of an SMSF. Trustee minutes or resolutions should exist for significant decisions made during the year. Our SMSF Trustee Obligations guide explains the record-keeping and governance duties in more detail.
It is important to understand that your auditor is not reviewing whether your original advice was good. They are testing whether the fund’s records and structures comply with superannuation law. But weak advice often produces weak documentation, and that documentation is what the auditor assesses.
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The link between ASIC’s findings and annual audit evidence
The practical question for trustees is not whether your original adviser would pass ASIC’s review. It is whether your fund’s records would stand up to your next audit.
The weaknesses ASIC found at the establishment stage create gaps in the same documents and structures your auditor tests every year. Here is how they connect.
| What ASIC flagged in advice | What your auditor tests in the fund |
|---|---|
| ”Control” used as justification without exploring client circumstances | Investment strategy reflects actual objectives, risk profile, diversification, liquidity and insurance |
| Adviser acted as order-taker with no product comparison | Trust deed is current, trustee declarations in place, governing documents support the fund’s structure |
| Conflicted advice to set up SMSF for property via LRBA | LRBA loan terms are arm’s length, bare trust structure is correct, asset valuations are market value, related party rules satisfied |
| No genuine assessment of whether SMSF was suitable | Trustee decisions are evidenced and supported by fund records |
Sources: ASIC Report 824 and ATO compliance audit requirements.
The connection is not that the auditor re-examines the advice. It is that poor advice can produce the exact kind of weak records, generic strategies and incomplete documentation that auditors are required to flag.
Worked example: property, LRBA and weak audit records
Consider a trustee who set up their SMSF in late 2023 on an adviser’s recommendation and used the fund to purchase an investment property through a limited recourse borrowing arrangement.
The adviser framed the recommendation around “taking control” of retirement savings. The Statement of Advice did not include a detailed comparison with the trustee’s existing industry fund. The investment strategy was templated, listing broad asset class ranges without reflecting the fund’s actual concentration in a single property. The LRBA was arranged through a lender connected to the adviser’s network. Loan terms were documented, but no independent valuation was obtained at the time of purchase.
Two years later, the fund goes through its annual audit. The auditor is required to check three areas that directly correspond to ASIC’s findings:
| What the auditor checks | What they find | Why it matters |
|---|---|---|
| Investment strategy reflects fund’s actual circumstances | Strategy says 20-40% in property. Fund holds 85% in one asset. | Mismatch between strategy and actual holdings can result in a contravention report to the ATO |
| Property valued at market value with objective, supportable evidence | Only valuation on file is from original purchase, now two years old | The ATO has flagged over 16,000 SMSFs with unchanged property or unlisted investment values across three consecutive years |
| LRBA is properly structured and documented | Bare trust deed was never fully executed | Incomplete structural documentation means the auditor cannot confirm the borrowing arrangement complies with the SIS Act |
In this example, the documentation gaps did not originate with the trustee. They originated with the advice and the setup process that came with it. But the trustee is legally responsible for the fund’s compliance, and the auditor reports contraventions to the ATO regardless of where the fault began.
This is the connection between ASIC’s findings and your audit. The advice was the starting point. The records are what remain.
Records to review before 30 June 2026
The audit for 2025-26 does not happen until after the financial year ends, but the records it tests are created now. Strengthening these areas before 30 June is the most practical response to both ASIC’s findings and the ATO’s stated compliance priorities.
Review your investment strategy
Does it reflect what the fund actually holds today? If asset allocation has shifted since the strategy was last written, or if fund circumstances have changed because a member is retiring, entering pension phase, or a significant market move has affected the portfolio, a documented update may be required. Evidence of the review can include minutes, a trustee resolution or a signed and dated strategy update, even if no changes are made.
The ATO expects the strategy to be a living document, not a set-and-forget template. For a deeper checklist, see our SMSF investment strategy requirements guide.
Obtain current asset valuations
All fund assets must be valued at market value as at 30 June. For listed shares and managed funds, this is straightforward. For property, unlisted investments and collectibles, the ATO requires objective, supportable evidence. A valuation that has not changed in three years is more likely to draw scrutiny.
Current valuations also connect to Division 296 planning and the 30 June 2026 cost base reset decision. See our Division 296 CGT cost base reset guide for that separate issue.
Check LRBA documentation
If the fund holds property through a limited recourse borrowing arrangement, check whether the loan agreement, bare trust deed and trustee resolutions are current, executed and on file. Loan terms should be consistent with ATO safe harbour guidance or supported by other evidence of arm’s length terms. The SMSF Rules and Limits Reference has a quick LRBA and related-party rules summary.
Ensure trustee minutes exist for significant decisions
Any major decision during the year, including asset purchases, pension commencements, benefit payments, contribution acceptance or investment strategy reviews, should be documented in trustee minutes or resolutions.
Confirm your auditor is appointed
The auditor must be appointed at least 45 days before the due date for lodging the annual return. Early appointment reduces the risk of audit bottlenecks close to lodgement. The audit must be completed before the annual return can be lodged, and a delayed audit delays everything that follows.
The SMSF Compliance Calendar can help you work backwards from the relevant lodgement date.
Pre-audit checklist
Before the 2025-26 audit begins, these five records are usually among the first items requested:
| Record | What your auditor needs |
|---|---|
| Trust deed | Current version, reflecting any amendments |
| Investment strategy | Reviewed and dated within the financial year, with evidence of the review through minutes, resolution or signed strategy update |
| Asset valuations | Market value evidence for every unlisted asset as close as possible to 30 June 2026 |
| Trustee minutes | Resolutions for significant decisions made during the year |
| Bank statements | Every fund account, covering the full financial year |
These are among the first records your auditor will request. Providing them promptly reduces the audit timeline.
Frequently Asked Questions
Does ASIC Report 824 mean there was a problem with my SMSF advice?
Not necessarily. ASIC’s sample was risk-based and deliberately targeted at files where poor advice was suspected. The 62% failure rate reflects a higher-risk sample, not the overall quality of SMSF advice in Australia.
Where a fund was established with properly documented reasoning and a clear assessment of member circumstances, ASIC’s findings are context rather than a conclusion about that fund. The practical takeaway is record-focused either way: current investment strategies, valuations, trustee minutes and borrowing documents are easier for an auditor to verify.
How often must an SMSF be audited?
Every SMSF must be audited annually. The audit covers both financial statements and compliance with superannuation law. It must be completed by an ASIC-registered SMSF auditor before the fund’s annual return can be lodged with the ATO.
What happens if my auditor finds a contravention?
If the auditor identifies a contravention of superannuation law, they are required to consider whether it must be reported to the ATO using an Auditor Contravention Report. Not every contravention results in penalties. The ATO considers the nature and severity of the breach, whether it has been rectified, and the trustee’s compliance history.
Common outcomes range from an education letter to financial penalties or, in serious cases, making the fund non-complying.
Can I change my SMSF auditor?
Yes. There is no requirement to use the same auditor each year. The auditor must be ASIC-registered and independent of the fund. Trustees can appoint a different auditor for 2025-26 if independence, expertise or service quality is a concern.
Is there a deadline to appoint an SMSF auditor?
Yes. The auditor must be appointed at least 45 days before the due date for lodging the fund’s annual return. For most SMSFs using a tax agent, the due date for the 2025-26 return will depend on the agent’s lodgement schedule, but trustees should confirm the appointment well in advance to avoid delays.
What is the best interests duty?
The best interests duty requires financial advisers to act in the best interests of their client when providing personal advice. Under the Corporations Act, the adviser must take steps to understand the client’s relevant circumstances and, having done so, ensure the advice is appropriate.
ASIC’s review found that in 62 of 100 files, advisers failed to demonstrate compliance with this obligation when advising clients to establish an SMSF.
What is a limited recourse borrowing arrangement?
An LRBA is a specific type of borrowing arrangement that allows an SMSF to borrow money to purchase a single acquirable asset, which must be held in a separate bare trust until the loan is repaid. The borrowing must comply with strict rules under the SIS Act, including requirements around the loan structure, the bare trust, and arm’s length terms.
ASIC’s review found that conflicted advice around LRBAs was the most common pattern in files that raised significant client detriment concerns.
This article is general information only and does not constitute financial advice. Consider speaking with a licensed financial adviser or SMSF specialist before making decisions about your fund.