John Wiseman
As the July 1 SMSF accountants’ exemption nears, and the impact the SMSF changes will have on accountants and SMSF trustees and members is revealed, is it any wonder that their level of concern is increasing rapidly as the administrative and advice ramifications are beginning to be understood in their totality said John Wiseman, industry consultant and principal of John Wiseman Consulting.
One such area John Wiseman points to that has gone relatively unnoticed relates to small Australian Prudential Regulation Authority (APRA) funds that should at least be included in a Statement of Advice (SOA) as a recommendation or as an alternative strategy for many SMSF trustees / members who will require advice regarding their options, not only post July 1 but NOW.
“In most cases this is not going to happen unless the AFSL holder / dealer group starts the training / education for the authorised representatives and has the appropriate products on their APLs”, said John Wiseman.
“At the moment this is being ignored by an alarming number of SMSF advice providers and another area that AFSL / dealer groups need to address immediately as this is required to enable them to compliantly service their clients and / or at least present it in the SOA as an alternative strategy”.
Many accountants who have / or are going to obtain their own AFSL to enable them to continue or commence providing SMSF advice are cautioned that Small APRA Funds (SAF) is not an area that should be ignored.
Hopefully, it is known by those who will be giving advice that a SAF is basically an SMSF, but with a professional, licensed trustee, who takes on the duties of compliance, administration, audit and the accounting; and it won’t be a stumbling block for the provision of appropriate / alternative advice said John Wiseman.
When providing industry presentations and workshops on SMSFs, John Wiseman includes the following points that should be considered:
- There is now significant regulatory focus on exit strategies and the ATO has made it clear that they expect this to be considered by the trustees when establishing their super fund.
- John also asks his audience to visualise the reaction and response of a dealer group’s auditor, or the professional auditor in cases where accountants have their own AFSL when he / she is perusing a file and notes how this is covered in the appropriate alternatives which may be a SAF.
- Reasons why an SMSF may need to be wound up that includes, death of a member, divorce of members, a member loss or lack of capacity, members loss of interest in running the fund, member becomes a non-resident, member becomes a disqualified person e.g. bankruptcy, etc.
A SAF will not always be the appropriate solution for a number of trustees / members but John Wiseman does suggest that this option be taken very seriously by those providing SMSF advice.
One of many outcomes of the new SMSF regulatory regime will be the inevitable increase in fees and costs for trustees and members – and these will be substantial as the cheap, DIY days are about to come to an abrupt end. As one of the primary motivators for SMSFs has been fees and charges, the new reality will see many seeking to exit their fund and some options they may need to consider are:
- Rolling over into a retail / industry fund or public offer
- Convert to a Small APRA Fund (SAF)
- Withdraw from the Fund if the Condition of Release conditions are met.
For those that do opt for a SAF, there are many advantages and John Wiseman strongly recommends professional advisers present these to clients as viable considerations when presenting an SOA. SAFs come into their own for situations:
- Where members lack capacity as the result of dementia or Alzheimer’s (that is predicted to affect over 1.3 million Australians by 2050).
- Blended families to protect both the old & new families.
- Protecting children with disabilities.
- For those with assets currently in SMSF converted to SAF – there is the possibility they can be maintained with tax advantages.
- The Superannuation Complaints Tribunal and the Superannuation Compensation Scheme cover Small APRA Funds and this could provide some compensation if losses were caused by theft or fraud. This is not the case with SMSFs.
The need for SAFs to be on APLs as outlined above is yet another example of both the issues and opportunities that is going to bring accountants and financial planners closer together as July 1 approaches.
“I expect to see many more problems arising in this highly charged environment and they are going to keep coming to the fore as the inadequacies and inefficiencies of the past are put under the spotlight.
“However, from disruption comes opportunity and I foresee an SMSF future that will be better for all stakeholders – especially the consumer – but expect to experience much more turbulence ahead of the calm water”, concluded John Wiseman.