Smarter SMSF chief executive Aaron Dunn said the decision by the Treasury to scrap the measure has seen “common sense prevail”, given the impact the requirement would have had on both practitioners and auditors in meeting what appeared to be an arbitrary date for financial statement preparation.

“Submissions made around this Treasury consultation were emphatic about no requiring any change to the current reporting regime for SMSFs,” Mr Dunn said in an online article.

“Luckily, Treasury has taken on this feedback and not proceeded with the proposed measure. That is great news for SMSF trustees and professionals alike.”

Tax Institute senior advocate Robyn Jacobson agreed it was a “very sensible” decision to drop the proposed requirement from the registered instrument.

“This outcome is good news for the tax practitioners on whose behalf we advocated,” Ms Jacobson said.

“There are already sufficient sanctions and penalties where the SMSF annual return is lodged after the due date. To impose a penalty on an SMSF trustee because the accounts were prepared less than 45 days before the lodgement date of the annual return would have placed an unnecessary burden on practitioners to prepare SMSF accounts earlier.”

The requirement would have also failed to improve either the integrity of the system or the revenue collection from SMSFs, she added.

“Accountants spread their workload across the year, which is one of the primary benefits of taxpayers using a tax agent. Ninety-nine per cent of SMSFs use a tax agent to lodge their annual return, and tax agents cannot afford to lose 45 days out of their schedule to prepare SMSF accounts earlier,” she stated.

“Overall, dropping this proposed requirement is in the best interests of the tax and SMSF communities.”