Olivia Long

Retirees, many of them SMSF members, are in danger of missing out on their valuable Commonwealth Seniors Health Card (CSHC) benefits following legislation that was part of the Federal Government’s Budget package, says Olivia Long, CEO of Xpress Super and SuperGuardian, the specialist self-managed super fund (SMSF) administrator.

“From 1 January 2015 the new deeming rules mean that Account Based Pensions started after this date will be assessed differently when determining an individual’s eligibility to receive the CSHC. It is something SMSFs must be vigilant about,” says Ms Long.

She was commenting on the new Government legislation that will see deeming rules applied to the Income Test for income from account-based superannuation income streams from 1 January 2015.

“Account-based superannuation income streams started before 31 December 2014 may be entitled to grandfathering provisions, where payments are assessed concessionally. Retirees need to be careful because if a pension is ‘reset’ via a stop and restart then this is considered a new pension and grandfathering is lost.

“Not many people realise that if eligibility for the card is lost, even for a short period of time, the grandfathering for all the Account Based Pension is lost,” she said.  “This can occur even if a person travels overseas for just six weeks.”

Ms Long says that it is important that SMSF trustees who have transferred most of their assets into their super fund should now review how they are structured.

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Olivia Long

There should be no barriers to establishing an SMSF, either educational or fund balance, said Olivia Long, CEO of Xpress Super and Super Guardian, the specialist self-managed super fund (SMSF) administrator, in a submission to the Financial Service Inquiry (FSI).

“We would urge the FSI not to impose a minimum of funds under management before people are allowed to establish a SMSF,” she said.

“In 2010, the Cooper Review looked at minimum balances and decided against setting a limit, and we are hopeful that the FSI will reach the same conclusion.

“Since Cooper’s report there’s been no evidence that trustees are proving to be anything less than diligent managers of their superannuation, whether it’s judged in terms of compliance or investment returns, which strongly suggests the status quo should remain.”

Long says that SMSF trustees with low balances do pay a higher percentage in fees compared with APRA-regulated funds, but we argue “these people have decided that’s a price worth paying to be engaged with their superannuation.

“It will have long-term benefits in terms of these people being more likely to be self-sufficient in retirement as our evidence shows they quickly get their funds under management up to a limit where their fee structures are on a par or even cheaper than the APRA funds.

[Australian Taxation Office (ATO) statistics show that the average operating expense ratio of SMSFs fell over the four years to 2010–11 and was stable in 2011–12. This contrasts with the estimated average operating expenses of APRA funds that increased from 2010 to 2012.]

“In addition, there are flow-on benefits to all other areas of their financial lives – provided they are given all the facts when they set up a fund, their balance should not be determining factor.

“As people live longer, it is even more important that they are engaged in their superannuation at an earlier age, not less.

“The recent Roy Morgan Research ‘Superannuation Satisfaction’ report shows, people using trustees are more engaged with their superannuation compared with the industry and retail funds.”

Long also cited ATO statistics to dismiss claims that SMSFs trustees are naïve in their investments.

“The ATO found that ‘SMSFs are both flexible and resilient in their ability to concentrate or diversify asset portfolios with an ability to respond to changing economic circumstances’.

“The numbers show this: the ATO reported that the estimates of the return on assets for the SMSF sector was positive in 2011–12. And while lower than the positive returns in 2009–10 and 2010–11, the trend is consistent with APRA funds. 

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Olivia Long

Industry funds expecting to reap the benefits of disillusioned SMSF members winding up their funds and re-joining the APRA-regulated sector are grasping at straws, says SuperGuardian, Xpress Super CEO Olivia Long.

Australian Taxation Office (ATO) figures for the five years to 30 June 2013 show that, on average, for every five SMSFs established, one was wound up, with gross SMSF establishments of 34,800 a year and wind-ups of 7800 a year.

Long says these numbers would clearly suggest that SMSFs are increasing in popularity, with growth over this five-year period of more than 27%, with the ATO ascribing it to improved community confidence in the economy and the adaptability of the SMSF sector.

“This hardly presents a picture of disillusionment”, she says.

She was responding to statement by Care Super CEO Julie Lander that SMSF trustees and members “were increasingly finding it a costly and time-consuming exercise they misunderstood before setting up. Worse still, closing an SMSF can be a very labor intensive and technical process.”

She expects the number of DIY investors looking to wind up their SMSFs to grow and a service to aid wind-ups will spur that process along.

Long says it’s always amazing how the retail and industry funds point to the number of wind-ups and conclude that suddenly the SMSF sector is losing its appeal when, quite clearly, the figures suggest the exact opposite.

“In addition, it is often implicit in their statements that trustees are quitting their SMSFs because of complexity, time, or because they have been closed down by the ATO.

“No doubt these are causes of some SMSFs being wound up. But I can add three other valid reasons that often apply:

• Death or ageing of a trustee. With more 55% of SMSF members over age 55, this is likely to be the cause of a larger number of natural wind ups;
• The taxation benefits of the SMSF are no longer relevant for retirees so they draw out the money and invest personally;
• People move overseas – at which point they roll over to an APRA-regulated fund as the easiest option.

“The reality is there is no hard and fast data on why SMSFs are being wound up. What we do know, conclusively, is that far more are being established than are being closed down, and the vast majority of these new SMSF members are coming from the ranks of the APRA-regulated funds,” Long says.

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Olivia Long

A seasoned industry practitioner is highly critical of the Federal Government’s decision to push back the date by which superannuation funds must comply with the SuperStream contributions data standards. Superannuation funds now have up to 1 July 2015 to meet the new standards.

SuperGuardian and Xpress Super CEO Olivia Long says that the Australian Taxation Office has given the industry “ample opportunity” to start complying with the new standards, and industry associations that are supporting the delay “are merely serving the interests of their under-performing members”.

“The ATO has given plenty of notice to the industry. Frankly there’s no excuse for practitioners not to be ready for these changes. Firms that have invested capital and made the effort to get ready are effectively being penalised.”

She agrees that SuperStream might have some impact on self-managed super funds (SMSFs) as some funds will have to get professional advice to meet the new standards.

“Going forward all SMSFs will be required to have a bank account and an electronic service address that are able to receive employer contribution payments and messages sent electronically using the SuperStream standard.

“This is yet another example of why accountants should consider outsourcing their SMSF work to SMSF accounting specialists.  The industry is continually changing and for many small accounting practices it is simply proving too difficult to stay ahead of the game,” Long says.

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Thumbs up for Xpress Super by the 2013 Smart Investor Administrator Survey.

The decision by the specialist self-managed super fund (SMSF) administrator SuperGuardian to introduce the low-cost option Xpress Super has been strongly endorsed by the 2013 Smart Investor Administrator Survey.

Xpress Super, which was launched in April, has taken the top two positions in all three categories and scored best product for medium balance SMSFs ($1 million).

Xpress Super chief executive officer Olivia Long says:  “We always believed a low-cost option would have strong market appeal, but to have our judgment confirmed so quickly is an enormous fillip for the business.

“Xpress Super provides a complete SMSF solution for the self directed investor – with free SMSF establishment, an online trading solution provided by Comsec Adviser Services and all accounting, tax and compliance provided all for the low fee of $799. [The average SMSF fee is $2700.]

“But it’s not just an issue of cost. We are one of the few firms that insist all our client managers are a SPAA Specialist SMSF Advisor, ensuring the total professionalism of our service.”

Xpress Super, one of Australia’s first paperless SMSF services, uses the state-of-the-art software offered by Class Financial Systems.

Class CEO Rajarshi Ray says: “We are delighted to work with XpressSuper. Its price, service and delivery model are clearly supported by the market.

“For too long the SMSF industry and its participants have been held back by inferior, incumbent technologies that ill serve administrators and trustees alike. The work of Olivia and her team is changing that situation via this service – and we are excited to be part of it.”

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