What an extraordinary period for the
financial services sector. In the space of a week the Government released its
responses to the Ripoll Inquiry and Henry Review, and Cooper’s phase three
report on self-managed super solutions. The Self- Managed Super Funds Professionals’
Association of Australia (SPAA) has been actively involved in each of these reviews
and agrees with most of the recommendations made and decisions taken. Our focus
throughout the consultation process has been to ensure the integrity and
viability of the SMSF sector, with a particular focus on lifting professional
standards. Our members adopt a fee-for-service approach, so we were pleased to
see the Government’s commitment in the Future
of Financial Advice reforms
to ban commissions paid to advisers by 2012.

Similarly, the Government’s decision
to remove the accountants’ exemption echoed our submission. The accountants’
exemption prevents accountants from being able to provide “unbiased advice” for
their clients about the different types of super funds. We’re advocating for
the introduction of a Super Licence based on an enhanced RG146 “superannuation
advice” education requirement and SPAA SMSF Specialist Adviser Standards, which
are set at undergraduate equivalent competency requirements. Cooper’s
recommendations were a great win for professionals advising SMSFs, with a
commitment to enhance professional standards and strengthen regulatory controls
to ensure suitability. We recommended minimum education requirements be set for
SMSF specialist advisers and that SPAA’s specialist accreditations should be
the benchmark.

Enhanced professional standards will also ensure suitability
concerns are addressed. SPAA recognises an SMSF is not suitable for all investors
and so we support Cooper’s recommendation to help would-be trustees evaluate
the best super option for their individual circumstances. Measures to enhance
controls and systems relating to SMSF rollovers, to help prevent fraud, were
also welcome. Evidence suggests bank accounts are the weak link in SMSF
identity fraud and so the review’s recommendation to introduce member identity
requirements is a positive step forward. SPAA has raised some concerns, however,
in regards to proposed measures to strengthen the independence of auditors.

While we agree independence for auditors is critical, we believe the panel’s
recommendation to legislate full audit independence – so that an individual or
firms providing any services to SMSFs, the members or the trustees cannot also
provide auditing services – is unnecessarily heavy-handed. We have also urged
caution on measures that impose restrictions on how fund assets can be invested
- in particular, restrictions on exotic assets, which are held by less than 0.1
per cent of SMSFs. The introduction of further transitional measures, and
difficulties associated with what constitutes a collectible or exotic asset,
will no doubt lead to further legislative complexities.

We question the need
for this, given the modest extent of the issue. SPAA is pleased to see the
concessions afforded to business real property have been retained by Cooper.
These concessions have helped many small business and primary producers prepare
for retirement and enabled them to grow their superannuation savings. Finally,
we largely supported the Government’s commitment to address adequacy in its
response to the Henry Review. However, we believe it missed an important
opportunity to address the issue of harsh excess contribution penalties. We
believe most excess contributions are unintentional. For example, there have
been instances where multiple employers who make compulsory SG contributions on
the member’s behalf have caused the member to exceed their contribution cap.
Indeed, the announced increase in the SG is likely to exacerbate this problem.
We will continue to request Government action on this issue.