“Auditors are picking up on this and saying [to trustees] that this just doesn’t meet the requirements of LRBA,” said Mr Colley.

“The thing with illegal borrowing arrangements is you’ve got to unwind them and that can be an expensive exercise because it may involve stamp duty and certainly may involve some capital gains tax."

The ATO has been looking at a number of similar cases, he added.

While the ATO commissioner has been quite generous in giving people a reasonable amount of time to unwind these arrangements, in cases where the tax office believes actions are part of a tax avoidance strategy, “trustees could fall into some big traps”, Mr Colley said.

The increased surveillance of auditors by ASIC and the ATO could be one of the reasons why these types of issues are surfacing and more enquiries are coming through to the SMSFA, he said.

“I think auditors are becoming a bit more particular about superannuation funds and they’re having a closer look at them [now] because they know that ASIC and the ATO is having much closer look at SMSF auditors,” he said.