“This has not been a requirement in previous years. Part A qualifications don’t necessarily relate to SIS compliance breaches, so it’s unclear what the ATO intends to do with this information,” Mr Burgess said.

“A Part A qualification can arise, for example, when the auditor takes over the audit of an SMSF and they are unable to confirm the fund’s opening balances because they haven’t been provided with the previous year’s audit report, or the auditor may have concerns about the recoverability or value of a particular asset which is not material in value.”

Mr Burgess said it’s likely the label was added in anticipation of the introduction of three-yearly audits for some SMSFs.

This was a measure announced in the 2018 federal budget that never eventuated following considerable backlash from the SMSF industry.

“Under this measure, it appears any SMSF that received a qualified Part A or B audit report would have needed to be audited for that income year and would not be eligible for the proposed three-year audit concession for at least another three years,” Mr Burgess explained.

“Whilst it appears the ATO may have jumped the gun here, they obviously found themselves in a very difficult position. By the time the decision was made not to proceed with the three-yearly audit measure, it was too late to remove this label from the 2019 annual return. Hopefully, it will be removed from the 2020 return.”