The 2025-26 financial year closed on 30 June 2026. For most of Australia’s 670,000-plus SMSFs, the next step is familiar: gather records, send them to the accountant, and wait for the auditor’s questions.
This year’s audit carries more weight than usual.
The 30 June 2026 values now sit immediately before Division 296 begins. They may also support the one-off Division 296 cost base reset election. The residential property LRBA change became law shortly before year end, with commencement after 30 June. On top of that, the ATO has been clear that it is looking at trustee behaviour, not just paperwork.
At the SMSF Association National Conference in February, ATO Deputy Commissioner Ben Kelly said more than 93,000 SMSFs had one or more outstanding annual returns, with about 20,000 funds having never lodged since registration. The ATO’s response includes expanded data matching, audit reviews and direct trustee contact. Lodgement, valuations and governance are all in focus.
That scrutiny does not mean every fund has a problem. It does mean a clean audit file matters. For trustees, the difference between a smooth audit and one that triggers follow-up usually comes down to preparation.
This article explains what an SMSF auditor checks, which areas most often cause queries, why 2025-26 is a more consequential audit year, and the records to prepare before the audit starts.
Key Takeaways
- Every SMSF must be audited annually by an approved, independent SMSF auditor before its annual return can be lodged.
- The 2025-26 audit is the audit immediately before Division 296’s first measurement year begins. Accurate 30 June 2026 valuations may have consequences beyond this year’s annual return.
- The five most common audit query areas are asset valuations, contributions, pension payments, investment strategy and related party transactions.
- Auditor Contravention Reports can trigger direct ATO attention. Consequences can range from education letters to personal penalties and, in serious cases, the fund being made non-complying.
- Audit delays usually come from missing or incomplete documentation, not complex compliance questions.
- Funds with residential LRBAs should keep clean documentation showing the arrangement predates the new rules, and funds with commercial property LRBAs should have business real property evidence on file.
What is an SMSF audit?
Every SMSF in Australia must be audited each year by an approved SMSF auditor. The auditor must be independent of the fund. They cannot be a trustee, member or relative of a member, and independence rules generally prevent the person who prepared the fund’s accounts from auditing the same fund.
The audit has two parts.
The financial audit checks whether the fund’s financial statements are supported by evidence and present the fund’s position fairly. The auditor checks assets, liabilities, income, expenses and member balances.
The compliance audit checks whether the fund has operated within superannuation law during the year. This includes contribution limits, pension standards, investment strategy, sole purpose test, related party dealings and fund structure.
Both parts must be completed before the SMSF annual return can be lodged. The auditor does not prepare the accounts and does not give financial advice. Their role is to form an independent opinion based on the records and evidence provided.
For the broader process, see the SMSF Audit Guide. For current trustee obligations that sit behind the audit, see the SMSF Trustee Obligations Guide.
What SMSF auditors check
The scope of an SMSF audit covers the fund’s operation during the financial year. This section is the broad audit map; the table that follows narrows the focus to the areas most likely to trigger questions or delays.
Financial statements. The auditor checks that assets are reported at market value, that income and expenses are recorded correctly, and that member balances agree with the underlying records.
Contributions. Contributions must be within the relevant caps, correctly classified and allocated to the right member. The auditor may review contribution dates, employer contribution records and notices of intent to claim a deduction. For the broader rules, see the SMSF Contribution Strategies Guide and Contribution Caps Hub.
Pension payments. If the fund paid an account-based pension, the auditor checks whether the minimum drawdown was met by 30 June. The evidence needs to show payment dates and amounts, not just an annual total.
Investment strategy. Every SMSF needs a written investment strategy that addresses the matters required under the ATO’s investment strategy guidance. The auditor checks whether the strategy exists, has been reviewed, and reflects the fund’s actual investments.
Related party transactions. Dealings with members, relatives, related trusts, companies or businesses must comply with the related party and arm’s length rules. The auditor may review leases, loan documents, rent evidence and in-house asset calculations.
Trust deed and fund structure. The auditor checks that the trust deed supports the fund’s activities and that the fund meets the SMSF definition, including the member and trustee rules.
Rollovers and SuperStream. Rollovers in or out of the fund need to be supported by appropriate records and, where required, SuperStream processing.
Sole purpose test. The auditor considers whether the fund appears to have been maintained for retirement benefits, or death benefits for dependants, rather than current-day private benefits for members or related parties.
Five audit areas most likely to cause problems
While the audit covers the whole fund, five areas consistently generate the most questions, delays and reportable issues.
| Audit area | What the auditor checks | What to have on file |
|---|---|---|
| Asset valuations | Every asset valued at market value as at 30 June, with objective and supportable evidence | Closing prices for listed assets, valuation evidence for property, current information for unlisted interests. Values unchanged for several years may be questioned |
| Contributions | Contributions received within caps, correctly classified and allocated | Contribution records, employer statements, member allocation records and notice of intent documents where relevant |
| Pensions | Minimum payments met by 30 June and pension documents current | Bank statements showing payment dates and amounts, pension commencement documents and pension schedules |
| Investment strategy | Written strategy exists, addresses required matters and reflects actual investments | Current signed strategy with realistic ranges, liquidity consideration, insurance consideration and evidence of review |
| Related party transactions | Dealings are at arm’s length and in-house assets remain within limits | Lease agreements, loan documents, market rent evidence and interest rate support such as ATO safe harbour rates where relevant |
The auditor can only verify what they can see. If evidence is missing, they must request it or qualify/report the issue if it cannot be resolved.
For more on the investment strategy part of the audit, see SMSF Investment Strategy Requirements. For pension timing, see the archived 2025-26 SMSF Pension Minimum Drawdowns article and the SMSF Pension Planner.
Why the 2025-26 SMSF audit is different
Three changes make the 2025-26 audit more consequential than a routine year-end review.
Division 296 starts from 1 July 2026
Division 296 applies from 1 July 2026, with the first assessment based on the member’s total super balance at 30 June 2027. That makes 30 June 2026 the practical starting point for the first year of Division 296 measurement.
For members approaching or above the $3 million threshold, inaccurate 30 June 2026 valuations can distort later calculations. They also affect the optional cost base reset election, which uses 30 June 2026 market values for Division 296 purposes only.
The 30 June 2026 SMSF valuations guide covers the evidence issue in detail. The Division 296 guide explains the tax calculation and who is affected.
Residential LRBA rules changed after year end
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 received royal assent on 26 June 2026. The residential property LRBA change commences on 10 August 2026.
That means the 2025-26 audit year ended before the 10 August 2026 commencement date. Even so, funds with limited recourse borrowing arrangements should expect careful review of loan documents, bare trust records, repayments, property evidence and related party terms. Existing residential LRBAs are treated differently from new arrangements entered into after commencement, so timing evidence matters.
For the detailed transition rules, see SMSF Residential Property Borrowing Banned and the SMSF Property Guide.
ATO scrutiny is broader than paperwork
The ATO’s February 2026 SMSF speech focused on lodgements, valuations, trustee engagement and data matching. The regulator specifically called out funds with outstanding annual returns and funds reporting unchanged values across multiple years.
That matters because audit files often reveal whether trustees are actively managing compliance. A signed but stale investment strategy, repeated late lodgements, unsupported valuations or unresolved prior-year contraventions can all indicate broader governance problems.
For the wider compliance context, see ATO SMSF Compliance Priorities 2026.
Division 296 and 30 June 2026 valuations
The link between audit evidence and Division 296 is easiest to see through valuation records.
Worked example: stale property valuation
Consider a trustee aged 62 with an SMSF worth $3.4 million. The fund holds $1.8 million in listed shares and ETFs, $900,000 in a commercial property leased to the trustee’s business, and $700,000 in cash and term deposits. The commercial property was last independently valued three years ago when it was purchased.
Scenario 1: the property is still reported at $900,000.
The fund reports a total value of $3.4 million at 30 June 2026. If the trustee later makes the Division 296 cost base reset election, the property’s Division 296 cost base is locked at $900,000.
If the property is actually worth $1.1 million, $200,000 of pre-commencement growth has not been captured. When the property is eventually sold, that may create unnecessary Division 296 exposure because the reset value was too low.
Scenario 2: the property is valued at $1.1 million.
The fund reports accurately at $3.6 million. The cost base reset uses $1.1 million. The pre-commencement growth is reflected in the evidence and the audit file is stronger.
| Stale valuation | Current valuation | |
|---|---|---|
| Reported property value | $900,000 | $1.1 million |
| Reported fund value | $3.4 million | $3.6 million |
| Division 296 reset value | $900,000 | $1.1 million |
| Pre-commencement growth captured | $0 of $200,000 | $200,000 of $200,000 |
| Audit evidence | Weak if based only on old purchase price | Stronger if supported by current valuation evidence |
This is not a recommendation to make the election. It is a reminder that valuation evidence has become a multi-year record, not just an annual return input.
For trustees considering the reset, the dedicated Division 296 CGT Cost Base Reset Guide explains the election mechanics and limitations.
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Auditor Contravention Reports and ATO action
If an auditor identifies a contravention, they must assess whether it is reportable under the ATO’s Auditor Contravention Report criteria. If it is reportable, the auditor lodges an ACR with the ATO.
An ACR is not just an internal audit note. It brings the issue to the ATO’s attention. The practical response depends on the type of breach, the amount involved, whether it has happened before and whether trustees have taken steps to rectify it.
| Severity | Typical ATO response |
|---|---|
| First-time minor issue | Education letter or reminder |
| Repeated or unresolved issue | Direction to rectify, possible enforceable undertaking or further contact |
| Serious contravention | Administrative penalties payable personally by trustees |
| Systemic or severe non-compliance | Disqualification action or the fund being made non-complying |
A non-complying fund can lose concessional tax treatment. That is a severe outcome, and it is one reason unresolved issues should be addressed before they become recurring audit findings.
Trustees notified of a prior-year contravention should also be careful. If the same issue remains unresolved, the auditor may have less discretion under the reporting criteria.
Why SMSF audits get delayed
Most audit delays do not start with a complex legal question. They start with missing records.
Auditors can only verify the file in front of them. When a document is missing, the audit pauses while the accountant or trustee tracks it down. Multiply that across several records and a straightforward audit can stretch across months.
Common delay points include:
- bank statement gaps, especially where accounts opened or closed during the year
- contribution records that show allocation dates but not receipt dates
- pension payment records that show the total paid but not the date each payment left the fund
- property or unlisted asset values that rely on informal estimates
- investment strategies that have not been reviewed, signed or updated after the portfolio changed
- trust deed amendments, lease documents, LRBA records or bare trust documents that are held separately from the annual file
The practical fix is to gather records before the accountant starts preparing the financial statements. The accountant and auditor often need the same evidence. Providing it early means the accounts are built from complete records and the audit has fewer stop-start moments.
2025-26 SMSF audit checklist
Use this as a general audit preparation checklist. It is not a substitute for your accountant’s document request list, but it covers the records SMSF auditors commonly need.
| Category | What to have ready |
|---|---|
| Bank statements | Full-year statements from 1 July 2025 to 30 June 2026 for every fund bank account |
| Investment reports | Broker, platform, managed fund and transaction reports for the full year |
| Contribution records | Date, amount, type and member allocation for every contribution received |
| Notice of intent records | Completed and acknowledged notices for personal deductible contributions, where relevant |
| Pension payment evidence | Bank statements or transaction records showing payment dates and amounts |
| Asset valuations | Market value evidence for every asset as at 30 June 2026 |
| Investment strategy | Current signed strategy that reflects the fund’s actual asset allocation and member circumstances |
| Trust deed | Current deed and any amendments made during the year |
| Minutes and resolutions | Trustee decisions on investments, pensions, contributions, leases, loans or benefit payments |
| Related party documents | Lease agreements, loan records, interest rate support, rent evidence and repayment records |
SMSF asset valuation evidence by type (2025-26)
Different assets need different valuation support. The ATO’s SMSF valuation guidance expects market value evidence that is objective and supportable.
| Asset type | Common valuation evidence |
|---|---|
| Listed shares and ETFs | Closing market price at 30 June, with a record of the source |
| Managed funds | Unit price or statement from the responsible entity at or near 30 June |
| Residential property | Independent valuation or documented appraisal evidence based on comparable sales |
| Commercial property | Independent valuation, especially where the property is leased to a related party |
| Unlisted shares and trust units | Net asset value based on current accounts and market values of underlying assets |
| Cash and term deposits | Bank statement or deposit confirmation at 30 June |
| Collectibles | Specialist valuation evidence, with extra care where the asset is sold or transferred to a related party |
One quick investment strategy check
Compare the fund’s actual 30 June 2026 asset allocation with the ranges in the written investment strategy.
If the strategy says 40-60% Australian shares but the fund is sitting at 75%, that mismatch is something the auditor may need to query. Market movements alone can create this gap, even when trustees have not deliberately changed the portfolio.
A short review before the audit can avoid a stale document becoming a compliance issue. For a deeper checklist, use SMSF Investment Strategy Requirements or the standing SMSF Investment Strategy Guide.
For a fuller explanation of the annual audit process, auditor appointment rules and common audit findings, see the SMSF Audit Guide.
Frequently Asked Questions
When does my SMSF audit need to be completed?
There is no separate fixed deadline for the audit itself, but it must be completed before the fund’s annual return can be lodged. The annual return due date depends on the fund’s circumstances and lodgement channel. Many funds lodged through registered tax agents have later due dates than self-preparers, but tax agents may set earlier internal deadlines.
Can my accountant also be my auditor?
Generally no. The auditor must be independent of the fund. If your accountant prepares the fund’s financial statements, they usually cannot also audit them. The auditor must be an approved SMSF auditor registered with ASIC.
What is the difference between a qualified and an unqualified audit opinion?
An unqualified opinion means the auditor found no material issue in the areas covered by the opinion. A qualified opinion means the auditor identified an area they could not fully verify, or a compliance issue that affects the opinion. A qualified opinion does not automatically mean an ACR is lodged, but the two can occur together.
How much does an SMSF audit cost?
Audit fees vary with fund complexity. A simple fund with cash and listed investments is usually cheaper to audit than a fund with property, unlisted assets, related party arrangements, collectibles or multiple pensions. The fee should be confirmed with the auditor or administrator before the engagement begins.
My fund only holds listed shares and cash. Is the audit still important?
Yes. The audit is still a legal requirement. Even for simple funds, the auditor checks ownership records, bank movements, contribution evidence, pension payments where relevant, investment strategy and annual return support.
What happens if I miss the annual return lodgement deadline?
Late lodgement can lead to ATO penalties and may affect the fund’s status on Super Fund Lookup. If a fund’s status is affected, rollovers and employer contributions may be disrupted. Under Payday Super, contribution processing timing is more visible because SG payments are linked to paydays.
Can the auditor help me fix problems before reporting them?
No. The auditor’s role is independent. They form an opinion and decide whether any contravention is reportable. Potential issues should be worked through with the fund’s accountant, tax agent or adviser before the audit begins.
Do I need a new valuation every year for property?
The ATO does not set a fixed annual revaluation rule for every property. The reported value must be market value at 30 June and supported by objective evidence. In practice, stale values become harder to defend when market conditions have changed, the property has been improved, or the same value has appeared in the accounts for several years.