I'm auditing a fund that has multiple years outstanding and terrible record keeping.
The Fund owns life insurance policies (and income protection) for husband/wife members however the records show the husband had a nil balance for a number of years (which per the trust deed makes him cease to be a member) and resigned as a director of the trustee company before the first year I am auditing. So now the SMSF owns a life insurance policy & an income protection policy for someone who is not a member.
The previous auditor prepared an unqualified report and no issues were noted.
I figure the insurance policy contravenes the sole purpose test...as it is not saving for the retirement of the sole member (wife). Is this the same conclusion you would reach?
Also the accountant preparing the job is asking me how they should treat the payment in the financial statements. Expense it as insurance but don't claim a tax deduction for it; treat as early access payment?
Any help will be greatly appreciated.
edited by Julie Flatman on 13/10/2020