Tracey Scotchbrook

There is an urgent need for the Government to prioritise legislative amendments to clarify the operation of wholesale investor rules for SMSFs in the wake of recent determinations by the Australian Financial Complaints Authority (AFCA).

SMSF Association Head of Policy & Advocacy Tracey Scotchbrook, in her address to the National Conference titled Advice, Practice & Regulatory: Shaping the future of the SMSF Industry, said the AFCA determinations had created “significant uncertainty” across the industry – especially for advisers and product providers.

“While the 2001 legislation that defined the wholesale investor test was poorly designed there was a broad industry consensus that a $2.5 million asset test and an investment of $500,000 in a financial product, set the wholesale parameters for investments acquired by SMSF trustees.

“But the recent AFCA determinations have cast a black cloud over this consensus, creating a situation where a $10 million asset test could be the new benchmark for a consumer to claim wholesale status. This now opens the door for potential compensation via the AFCA – for a poor investment decision.

“In this regulatory environment, there will be genuine risks for advisers with SMSFs  who have been classified as wholesale under the $2.5 million asset test but are now potentially vulnerable to a $10 million threshold.”

Scotchbrook told delegates that it just won’t be advisers and product providers who would be affected.

“There will be SMSFs who will no longer be able to access a product because they won’t be classified as wholesale investors. Funds who were previously investing as wholesale clients may now need to be reclassified as retail clients. They will need to be advised by a licensed financial adviser at the very time when the industry is suffering a chronic shortage of advisers. It all adds up to a cacophony of problems.”

She said the Association had used its 2025-26 Pre-Budget submission to highlight the pressing need for legislative certainty to ensure advisers could continue to operate with confidence when advising wholesale clients.

“Trustees, financial advisers, and product issuers are now faced with uncertainty on how to apply the wholesale investor tests, raising serious concerns about the implications for investment decisions and access to wholesale financial products.”

“Without immediate intervention, the uncertainty could disrupt existing investment strategies, force SMSFs to divest from wholesale products, and create adverse consequences for broader capital markets.

“These long-standing issues have been ignored for too long, and AFCA’s recent determinations have now brought them to a head. The Government must act swiftly to preserve investment choice for SMSFs and ensure that the wholesale investor framework operates as originally intended.”

In her wide-ranging review of long-term industry trends, Scotchbrook told delegates that the accounting and financial advice professions had a critical role to play in the identification and reporting of financial abuse.

“A comprehensive Parliamentary Joint Committee inquiry in 2024 shone a light on the significant harm caused by domestic abuse via coercive control and financial abuse, and how perpetrators exploited loopholes in the laws and systems to engage in this nefarious activity.

“In this respect, the advantages of an SMSF structure that are so effective when used legally and ethically can be exploited by perpetrators – a point the parliamentary committee highlighted. SMSF professionals must be alert to these issues and to identify and report this abuse.”

She said the committee also recommended reviews of the superannuation system and the professional and ethical obligations as they related to financial abuse. “While a review is welcomed, practitioners need to be aware of their existing duties and obligations under the law and through their respective codes of ethics and conduct,” she said.

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Tracey Scotchbrook

The SMSF Association is calling on the Government to amend the legislation governing the GST treatment of adviser fees to avoid increased costs being passed on to consumers.

Commenting on the ATO announcement late last year, that super funds and platform providers would, from 1 July 2024, no longer be permitted to claim a rebate for the GST component of adviser fees deducted from a member’s superannuation account, SMSF Association Head of Policy and Advocacy, Tracey Scotchbrook, said the timing of the announcement was unfortunate.

Scotchbrook says: “Given all the focus at the moment on reducing the cost of advice, this announcement, which will have the effect of pushing up the cost of advice, is contrary to the Government’s stated objective of enhancing the affordability and accessibility of financial advice.”

It is estimated this change in the treatment of GST on adviser fees will increase the cost of advice to impacted consumers by around 7% and it is likely to impact many thousands of super fund members and their long-term retirement savings. The cost to the industry in terms of changes to systems and the supporting fee disclosure documentations should also not be overlooked.

Scotchbrook added: “To preserve the status quo and to support the advice industry which in recent times has been crippled by the rising cost of sector-based levies, we are asking the Government to amend the law to ensure the previous interpretation for the treatment of adviser fees is retained.”

“This could be achieved by a relatively simple legislative amendment to preserve the approach adopted by industry and supported by multiple private binding rulings.”

In the interim the Association is also calling on ASIC to join the ATO on their no compliance approach. Noting the transitional period should be extended beyond 30 June to provide certainty and clarity, as both product issuers and financial advisers scramble to comply with this unexpected change and to identify, notify and engage with impacted clients.

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Tracey Scotchbrook

The SMSF Association says the ATO’s position in relation to what is expected of auditors when checking whether or not there are any charges over an SMSF’s assets has not changed.

Despite recent speculation that the ATO had changed its position on this issue, SMSF Association Head of Policy and Advocacy, Tracey Scotchbrook, says this is not the case.

“We have confirmed with the ATO that the Commissioner has not made any changes to its view which aligns with an SMSF auditor’s obligations as set by the Auditing and Assurance Standards Board. The ATO’s recent statements in ‘Checking for charges over property assets’ (QC 73156) does not restrict an auditor applying their professional judgement or providing alternative evidence.”

She adds, however, that testing a trustee’s compliance with SIS Reg 13.14 is, by its nature, “fairly limited” and most commonly satisfied by a title search.

She says the ATO’s position has been consistent for some time, with the ATO’s compliance audit guidance on SIS Reg 13.14 stating:

The auditor should obtain evidence that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by carrying out the following checks:

• • Property title search to check for encumbrances on real property.
  • The Personal Property Securities Register for other parties registering interests against other SMSF assets.

Scotchbrook adds: “As the number of auditor referrals to ASIC continues to rise, it’s increasingly obvious that there is a misalignment between the ATO’s expectations and the practices of some in the industry, and it is something we as a sector need to work on to bridge the gap.

“In our opinion this will be greatly assisted by the ATO’s decision to release a series of articles to provide clarity to auditors.

“Importantly, we expect future ATO articles to focus on specific compliance issues ATO officers have identified when reviewing SMSF auditors.

“It also reinforces the fact that a cursory review of an SMSF won’t meet the ATO’s expectations if the auditor is subject to a compliance review.

“This is not to say most auditors are not doing the right thing. But it is to highlight that if auditors want to prevent a referral to ASIC, they need to demonstrate that they follow a rigorous process that clearly documents and adequately supports their opinion.”

SMSF professionals are continually confronted with these complex arrangements, with the upcoming virtual offering of the SMSF Association’s SMSF Audit Day on 20 September 2023.

The one-day program will delve into the importance of SMSF trustees and auditors collecting and retaining appropriate evidence.

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Tracey Scotchbrook

The SMSF Association remains firmly opposed to the introduction of a cap on superannuation balances, the Association’s Head of Policy and Advocacy, Tracey Scotchbrook, told the National Conference yesterday.

While acknowledging that excessively high balances were outside the policy intent of superannuation, she said the introduction of Transfer Balance Caps have ensured it’s a legacy issue that time will resolve.

“Our fear is that a system that is already complex with multiple caps and thresholds will become even more so, and, consequently, having a negative impact on consumer confidence in superannuation.”

“We are also concerned that this debate is being framed as an SMSF issue when APRA-regulated funds also have large balances.”

Scotchbrook said a hard cap will raise investment issues for members, especially those who have illiquid assets.

“How much time will fund members have to act and what will be the potential disruption to markets with people being forced sellers. There is also the issue of the impact on fund administration and management costs, as well as the effect it could potentially have on other members of the fund.”

She says another concern is the potential for retrospectivity. “Any growth in fund investments has accrued in the current tax environment, so any changes to the taxation of unrealised capital gains would therefore have a retrospective effect.

“Gains accrued under the existing tax environment should continue to be taxed in the same manner, noting the CGT concessions that applied under the Fair and Sustainable superannuation reforms in 2016-17.”

Those individuals who have contributed personal injury compensation amounts or received insurance benefits in superannuation also should not be forgotten.

“These proceeds are essential for the funding of the ongoing care and needs for the lifetime of those individuals. Just like the current transfer balance cap and total superannuation balance rules, those proceeds must be expressly excluded from any proposed measures,” she said.

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Peter Burgess

The SMSF Association has significantly boosted its Resource Library content for its Fellow, Specialist and Associate members.

Recordings of the 2020 and 2021 National Conference sessions, as well as presentations and technical papers from the 2020 and 2021 Technical Summits, have been added to the library for the exclusive benefit of members.

And, to further boost the Association’s technical support service capabilities, Fabian Bussoletti has been appointed Technical Manager. Fabian is an experienced SMSF expert and a former senior member of AMP’s well-regarded TapIn technical services team.

Association Deputy CEO Peter Burgess says: “Our Fellows, Specialist and Associate members now have access to all the recorded sessions from prior year National Conferences and Technical Summits, enabling them to revisit and re-live these outstanding sessions.

“Logistically, it has been an enormous exercise to increase our Resource Library content by about 40%. In total, 28 technical papers and 62 technical presentations have been added over the past month.

“But we firmly believe it has been a very worthwhile exercise with the National Conference and Technical Summit sessions complementing other material in the library such as go-to guides, technically speaking bulletins, and white label documents.

“If you are a Fellow, Specialist or Associate member and you haven’t visited the library recently, now is a good time to look. Access to this material is an important member benefit that is designed to support the ongoing development of our Fellow, Specialist and Associate members.”

Burgess says Bussoletti’s appointment adds considerable experience and depth to the technical team. “It’s no secret we would like to see more practitioners undertake the SSA® program in our quest to enhance the quality of SMSF advice. Together with Fabian, Mary Simmons and Tracey Scotchbrook, the Association boasts a formidable and experienced team of technical writers and experts.

“This appointment means we have the scale and capabilities to continue to invest in our SSA® program so that it remains the benchmark for SMSF practitioners. Considering Fabian’s extensive technical support experience, his appointment also enables us to enhance the level of SMSF technical support to members.

“The recent enhancements we have made to our SSA® program, the addition of past conference materials to our library and Fabian’s appointment underpin a renewed focus on the core components of our member value proposition – growing expertise, fostering connections and leading the sector.”

Commenting on his appointment, Bussoletti said he was excited to be joining the Association’s technical team. “I have always been impressed by the work the Association does to promote professionalism and higher education standards in the SMSF sector, and I look forward to working with the team and Association members.”

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John Maroney

The SMSF Association’s annual Technical Summit is always replete with topical issues presented by industry experts – and this year’s virtual event is no different.

Association CEO John Maroney says SMSF specialists will have no shortage of quality material to digest at the Technical Summit being held on 28 July, with three sessions of particular note for delegates.

“In one Technical Session, lawyer Michael Perkins and clinical neuropsychologist Dr Jane Lonie from the consultancy Autonomy First will address the issue of cognitive decline and how clients deceive you about their decision-making ability, with the aim of giving delegates the practical tools to help them accurately evaluate clients.

“You will learn how to evaluate and deal with the decision-making behaviour of clients, a critical skill considering an ageing SMSF population.

“In another Technical Session, lawyer Jeremy Gordon and the SMSF Association’s Policy Manager, Tracey Scotchbrook, will examine the issue of Australians with UK pensions.

“For those specialists with clients with UK pensions, this session is compulsory listening as they will dissect the recent Qualified Recognised Overseas Pension Scheme (QROPS) changes, trends, and common pitfalls in the UK pension transfer process.

“This session will provide guidance on the often overlooked and misunderstood obligations of SMSF trustees once the UK sourced pension money has been transferred, as well as changes to the SMSF residency rules as announced in the 2021 Federal budget.”

Maroney says the Technical Session address by Tim Miller, SuperGuardian’s Education Manager, on SMSFs and digital investments is highly relevant at a time when crypto/digital investments are becoming increasingly popular among SMSFs.

“This session will look at the impact of a reactive regulatory environment versus a proactive investment environment. For any SMSF specialists with clients investing in this asset class, it will make for compelling listening.”

Maroney says the Technical Summit has become a highlight on the SMSF specialist’s calendar, and the 2021 program provides further evidence why this is so.

“It will give SMSF specialists the opportunity to learn from some of the brightest minds in our super sector, thereby enhancing their professional development.”

Register for the event.

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Hamilton, who joined the board in February 2011 and was Chair from February 2012 to February 2014, takes over from Robin Bowerman, who will remain on the board as Deputy Chair.

Bowerman assumed the Chair in September 2019 after Professor Deborah Ralston stood down (her term was due to end at this conference) to avoid any perceived conflicts of interest after being appointed to the Retirement Income Review panel.

From 21 February, the board will comprise Andrew Hamilton – Chair, Robin Bowerman – Vice Chair, Robyn FitzRoy, Liam Shorte, Bernie Ripoll, Tracey Scotchbrook, Michael Houlihan and Scott Hay-Bartlem.

Bowerman says the Chair could not be in better hands with Andrew stepping into the role.

“He brings enormous knowledge of the industry, a wide experience about the Association, and a deep understanding of the issues facing our members.

“I also want to acknowledge the enormous contribution of my predecessor, Professor Ralston, in what was a challenging period for our Association, as well as the full support I received from the staff under the leadership of our CEO, John Maroney.”

Hamilton says it’s an honour to again be asked to chair the organisation. “Although our industry is in a period of enormous change, I remain confident that the new regulatory, legislative, and educational framework, which aims to raise the standards across the industry, will be conducive to a business environment in which the SMSF specialist can flourish.”

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Hay-Bartlem, a chartered tax adviser and member of the Society of Trust and Estate practitioners who specialises in issues such as tax and superannuation and estate planning, is the third Specialist Adviser to join the Board in the past month.

Tracey Scotchbrook, Vice Chair of the West Australian Local Community, and Michael Houlihan, Chair of the Victorian Local Community for the past four years, joined on 1 June.

Association Chair, Dr Deborah Ralston, says it’s extremely pleasing to have another Specialist Adviser join the Board, especially as Scott brings a distinguished record of service to the SMSF sector, including a notable role as a valued presenter to the Technical Day events and the National Conference.

“This appointment, when coupled with the recent appointments of Tracey and Michael, gives the Association a strong and diverse Board boasting a broad range of skills and experiences that will allow us to better meet the needs of members and tackle the policy challenges facing the SMSF sector.”

In 2016, Hay-Bartlem was awarded the 2016 Brisbane Wealth Management/Succession Planning Practice Lawyer of the Year and the 2019 Superannuation Lawyer of the Year.

He has also been selected by his peers for inclusion in the Eleventh Edition of Best Lawyers in Australia in the practice areas of: superannuation law, trusts and estates and wealth management/succession planning practice.

Hay-Bartlem says: “It’s a rare honour to join the SMSF Association Board. I have always found my involvement with the Association to be extremely fulfilling, believing it plays a crucial role in advancing the interests of the SMSF sector, so to be invited to join the Board is both exciting and humbling.

“I look forward to working with Deborah and the other Board members to enhance the interests and goals of the Association and the wider SMSF community.”

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Association Chair, Dr Deborah Ralston, says it’s extremely gratifying to appoint two members to the Board who bring a strong sense of duty to the SMSF sector, as well as complementary skill sets and industry experiences.

“Both Tracey and Michael met our selection criteria of having managed complex stakeholder relationships, experience at senior management and board levels, relevant tertiary qualifications and ongoing involvement with the SMSF sector.

“The fact that these members have had such a long and committed relationship with the Association bodes well for continuity at a time when we are undertaking Board renewal. It also reflects well on the strength and capabilities of our membership that we can make appointments of this calibre.”

Scotchbrook, a chartered accountant boasting SMSF Specialist and Public Practice certificates, has had significant involvement with the Association, including membership of the Professional Standards and National Membership committees and Chair of the West Australia Local Community from 2012 to 2016. She was also a Board member and Treasurer of Community Midwifery WA from 2009 to 2012.

“It’s a privilege to be asked to join the Board. I have always found it tremendously fulfilling to be involved with the Association, and especially the West Australian Local Community, so to have my commitment recognised in this way is enormously rewarding.”

Houlihan, with more than 30 years’ experience in financial services, brings an excellent understanding of market trends and dynamics across the different superannuation sectors to the Board. A member of the Victorian Local Community for the past seven years, he is also the Executive Director of Strategic Wealth Services, Non-Executive Director of Evergreen Consultants and Chair of Eltham College.

“I have always been a passionate supporter of the SMSF sector, believing it gives people who opt to do so the opportunity to take direct responsibility for their superannuation. It’s for this reason I chose to contribute to an organisation that’s rightly recognised as the peak body for the SMSF sector, and to have that contribution acknowledged in this way is extremely satisfying.”

Ralston says these two appointments are a direct response to the Expressions of Interest called for late last year. “What’s important to note is that we attracted a very strong field of almost 30 candidates, demonstrating to me and my fellow directors the commitment and enthusiasm our members have, not just to the Association but to the SMSF sector.

“These appointments, when coupled with the recent appointment of Bernie Ripoll, who has served on our Public Policy Committee since early 2017, allows us to build a strong and diverse Board with a range of skills and experiences that will enable us to better meet the needs of members and tackle the policy challenges facing the sector.”

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