Andrea Slattery

The SMSF Professionals’ Association of Australia (SPAA) has outlined its stance on the disclosure of SMSF risks in its submission to ASIC on Consultation Paper CP216.

SPAA CEO Andrea Slattery says the organisation welcomes ASIC’s goal to improve the standard of advice given to prospective SMSF trustees.

“This includes disclosures on the risks associated with SMSFs; however, the requirements in the ASIC paper may not achieve those goals or be appropriate in the circumstances.

“We believe the general impetus to improve disclosure in order to reduce risks for consumers is merited and will strengthen the integrity of the SMSF sector.

“ASIC’s recommendation that advisers must provide a warning that SMSFs are not entitled to Part 23 compensation under the SIS Act is too simplistic.

“This approach ignores the complex nature of compensation for funds affected by fraud or theft. APRA-regulated funds are not guaranteed compensation under the SIS Act for fraud or theft and the fact that SMSFs do have other avenues for seeking compensation for theft or fraud has been ignored.”

In its submission, SPAA pointed ASIC to the uncertain nature of Part 23 compensation for APRA-regulated funds. The proposed disclosure perpetuates the “common misconception that APRA-regulated funds will definitely receive compensation if the fund is a victim of fraud or theft.

“Instead, we believe any warning that SMSFs are not entitled to Part 23 compensation should be made in the broader context of advisers discussing all compensation arrangements available to SMSFs.”

SPAA’s submission supported the other SMSF risk disclosures suggested by ASIC but warned that these risks often depended on the individual circumstances of the SMSF and their members.

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Andrea Slattery

The SMSF Professionals’ Association of Australia (SPAA) yesterday welcomed the Coalition Government’s decisions to abandon the plan to tax earnings exceeding $100,000 from assets supporting self-funded pensions as well as the proposed $2000 cap on self-education expenses.

SPAA CEO Andrea Slattery says: “Since the tax on earnings exceeding $100,000 was announced, SPAA has been a strong advocate to both sides of politics that the proposed tax was going to be an extremely complex and inefficient to administer for all types of superannuation funds, big and small.

“We were also concerned that depending on the investment earnings of the fund, the proposed tax would potentially apply to many more than the estimated 16,000 funds with $2 million of assets or more that the former Government estimated it would extend to.

“For instance, if the tax was to apply to the 2012-13 financial year where many Australians enjoyed returns of around 15% on their superannuation assets, people with around $666,000 in superannuation would have been affected by the tax.

“The decision to abandon the tax will provide certainty for those saving for their retirement and those already in pension phase and relying on their superannuation to fund their retirement.”

Mrs Slattery says the decision to abandon the proposed $2000 cap on self-education expenses would ensure that professionals providing advice on SMSFs would be able to access the highest quality education.

“SPAA was critical of this policy as being short-sighted and self-defeating, arguing it would inhibit professionals, including those in financial services, maintaining and improving their knowledge to better serve their clients.

“We are a strong advocate of improving Australians’ retirement outcomes and this requires their advisers to be able to constantly increase their competencies through education, which this policy would have made more expensive for them.

“Ultimately, this proposed policy was going to have a negative effect on consumers and SPAA is happy to see it abandoned.”

She says that SPAA remains concerned with the Government’s decision to repeal the Low Income Superannuation Contribution which ensures that people earning under $37,000 a year do not pay more tax on their compulsory superannuation contributions than they do on their income

“We will work with the Government to formulate a policy that efficiently and fairly ensures that low income earners do not face an inequitable outcome of having their compulsory superannuation contributions, which should be concessional, taxed at a rate higher than their income.

“SPAA will also work on the Government’s list of 64 announced but unlegislated tax measures to give advice on what measures should be proceeded with to improve the efficiency and integrity of the superannuation system.”

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“Ride the Wave”: 2013 SPAA Conference.

Planning is underway for the SMSF Professionals’ Association of Australia’s (SPAA) National Conference to be held in Brisbane at the Convention & Exhibition Centre from 19 to 21 February 2014.

Following on from this year’s highly successful Melbourne conference that celebrated SPAA’s 10^th anniversary, the SMSF sector’s pre-eminent industry association is working overtime to ensure its members benefit from another first-class event.

The conference, which has as its theme “Ride the Wave” to signify the ongoing success of the SMSF sector, is again attracting high calibre speakers from Australia and overseas.

Graeme Colley, SPAA’s Director Technical and Professional Standards, who heads the national conference committee, says: “Next year’s event is promising to be even bigger and better than this year, reinforcing the fact that our national conference is the premier event on the SMSF calendar.

“The list of speakers is impressive, with a focus on the technical content that I know our members really appreciate. We have even managed to attract an Academy Award winner, although I’m not at liberty to say who at this stage.

“Aside from the actual conference, there will be three exciting social events, as well as networking opportunities for delegates.”

Registrations open on Tuesday October 1. There are Early Bird offers until November 30, as well as the opportunity for industry professionals to sign up as a SPAA member to take advantage of the discount.

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Andrea Slattery

The SMSF Professionals’ Association of Australia (SPAA) welcomes the announcement by the Treasurer Chris Bowen to commit to no major changes to superannuation tax policy for five years.

SPAA chief executive Andrea Slattery says: “This initiative is welcome. SPAA has been advocating that continual change to the superannuation rules acts as a disincentive for people to save for retirement.

“The commitment by the Government and Opposition to both make a commitment to no detrimental change is a step in the right direction to achieve bipartisan support for a more sustainable superannuation system that gives people greater confidence going forward.

“SPAA has always insisted, as far as possible, that superannuation be above short-term budgetary political pressures. “Superannuation is a lifetime commitment with the aim of reducing the long-term costs to government and allowing people to retire with dignity.

“Several recent reports that SPAA has commissioned have graphically illustrated that people’s confidence in the system is being undermined, and this commitment to not change superannuation tax policy by the Government and Opposition should help reverse this sentiment.”

Mrs. Slattery says SPAA also supports the decision to bring forward the legislation to establish the Super Council as another way to ensure superannuation is depoliticised.

“There are many examples of similar boards that advise government that play an important role in giving advice that is objective, independent and above day-today politics. To ensure this happens it is critical that eminent people from across the community who truly understand the retirement needs.

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SPAA State Technical Conference 2013

Some important  legislative changes for the self managed super fund sector were not implemented before Parliament rose, Peter Burgess, head of Policy & Technical, AMP SMSF, told the SMSF Professionals’ Association of Australia’s (SPAA) Technical Conference in Sydney today.

Burgess, who was giving a Regulations and Legislation Update to the SPAA delegates, said the changes, relating to trustee penalties, rollover of funds into an SMSF, and tougher penalties for illegal early release would have addressed some legislative shortcomings in the SMSF sector.

“While the scrapping of the proposed banning of off-market transfers was broadly seen as win for the sector, there is evidence that some tightening of the rules is necessary.

“It is likely the Government of the day will need to revisit their position on SMSF off-market transfers and a tightening of the rules, rather than the outright banning of off-market transfers, would be in the best interest of the SMSF sector.

“All of these changes are about strengthening the integrity of the sector and helping to minimise the likelihood of fraud occurring in the SMSF sector – of critical importance at a time when assets under management are about $500 billion.”

The key elements of the proposed changes which were not implemented are:

1. Related party SMSF transactions:

• Banning of off-market SMSF transfers of listed securities;
• Transactions supported by qualified independent valuations.

2. New SMSF trustee penalties:

• Rectification direction;
• Education direction;
• Administrative penalties.

3. Tougher penalties for illegal early release:

• Targeting promoters of illegal early release schemes;
• Illegal early release amounts taxed at a higher MTR

4. Rollovers to an SMSF a designated service for Anti-Money Laundering and Counter Terrorism Financing Act purposes:

• APRA funds required to risk assess and undertake additional ID checks when rolling funds into an SMSF.

Burgess said although these changes failed to make it through the parliament, there were some positive changes that got the thumbs up during the last legislative session.

“In particular, the higher concessional caps introduced for the 2013-14 financial year and the repealing of the excess contributions tax in relation to excess concessional caps were important two changes that enjoyed widespread support across the industry.”

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Andrea Slattery

The profile of self managed super fund (SMSF) investors is dramatically evolving, which means SMSF professionals need to quickly adapt their advice models to meet the different needs of this growing sector of investors, according to the findings of a new study from Macquarie Bank and the SMSF Professionals’ Association of Australia (SPAA).

“This is something we at SPAA have always known, but this research breaks another anecdotal misconception,” SPAA CEO Andrea Slattery says.

The Active Management Report revealed that 46 per cent of recent[i] SMSF investors are under the age of 30 and one in five are females who still live at home with one or more parents. Macquarie and SPAA say this strongly indicates that SMSFs are being considered and set up by people with a very different profile to traditional SMSF investors.

Macquarie Bank’s Analytics Insights Manager, Gary Lembit, says the younger generation in particular is becoming more engaged and with SMSFs often involving family members, SMSF management is very much a family affair.

“As we are aware, high property prices are making it a real challenge for young Australians to enter the housing market and this is one of the main reasons why adult children are staying at home for longer. It is also encouraging them to think about where else to invest their money so they are building their wealth for the future, and of course, retirement,” Mr Lembit says.

“Actively managing an SMSF for many investors means engaging other family members and involving them not only in the decision-making, but also in the ongoing monitoring, reviewing and planning of the SMSF. It is therefore important for SMSF professionals to involve family members in the advice process.”

The study revealed some interesting differences between current and intending SMSF and non-SMSF investors. Current and intending SMSF investors tend to be more purposeful in their financial behaviour and are constantly striving to benefit their families financially in the long-term. Compared to non-SMSF investors, both current and intending SMSF investors are more likely to save as much as they can, with two in three intending investors saying they save as much as possible. Recent investors (60 per cent) and intending investors (63 per cent) are also highly likely to seek out ways to earn more, with intending investors particularly likely to work multiple jobs (31 per cent). Meanwhile, established investors are more likely to invest spare cash, which is further evidence of active money management. SMSF investors, in particular intending investors (nearly one in four), also say they ‘love experts’ more than non-SMSF investors.

Mrs Slattery says these findings confirm that SMSF investors take an active role in managing their investments from day-to-day and an active role in their savings and future retirement plans.

“Having made the decision to set up an SMSF to have more control and choice over their investments, it is not surprising that SMSF investors are highly engaged and informed,” Mrs Slattery says.

“But what is not surprising is this engagement is manifested both in a tendency to actively monitor the performance of their portfolios and to take positive actions to enhance that performance. As a result, they have greater advice needs than other investors and a higher propensity to seek out and value advice. The encouraging news for SMSF professionals is that SMSF investors love experts so there is a real opportunity for them to demonstrate the value they can add, in the knowledge that their clients will be very open to receiving their advice. This is the message we have been putting to the market and this research supports it.

In addition to having revealed that SMSF investors have a hunger for interaction with the experts, the study also confirmed SMSF investors are far more likely to discuss investing and wealth with their family than non-SMSFs. Intending investors are particularly active in discussing their finances, including day-to-day financial management (55 per cent) and financial worries (63 per cent). Only 30 per cent of recent investors say they frequently discuss financial worries. Meanwhile, established investors are more likely to talk about topics like charitable giving (41 per cent) and organ donation (37 per cent), indicating an interest in planning for the future that extends beyond their finances.

Just as they are active in their conversations regarding their wealth, SMSF investors have remained active in their investments. In recent years, SMSF investors have allocated more of their investments towards direct equities, while direct property has continued to grow in importance as an asset class[ii].

“What this study shows is that SMSF investors share some common traits which allow SMSF professionals to proactively engage this inquisitive and collaborative group. But there are also some noticeable differences at each stage of the SMSF lifecycle, which means that if SMSF professionals can demonstrate that they understand the distinct needs of SMSF investors then they can build higher quality client relationships and better service the demands of this increasingly important sector,” Mr Lembit says.

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In its Compliance in Focus briefing delivered to the industry this week, the ATO said it intended to increase audits of SMSF trustees for both their regulatory and income tax compliance.  The ATO expects to audit 1,100 funds for income tax compliance and 15,100 funds for regulatory compliance in 2013-14.

The SMSF Professionals Association of Australia (SPAA) Senior Manager, Technical & Policy, Jordan George, says:  “It is critical SMSF trustees are aware that their running of their SMSF will be under even greater scrutiny going forward.

“The ATO are specifically targeting prohibited loans, related party transactions, SMSF return lodgement and funds with a history of non-compliance.

“In this environment, SMSF trustees need to ask themselves are they getting the best possible advice and if they aren’t is it worth risking their fund’s complying status?  Being made non-complying can severely damage trustees’ retirement plans as their fund loses its superannuation tax concessions.”

George says the ATO Overview also highlighted the fact the SMSF sector is complying with the law, the decision to increase monitoring notwithstanding.

“The ATO reports that 98% of SMSFs complied with the law in the 2012-13 financial year.

“This confirms what SPAA has been saying – that the SMSF sector is a healthy, compliant and well-functioning sector of the superannuation industry, simply confirming what the Cooper Review stated in its final report in 2010.”

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