The increasing strength and importance of the self-managed superannuation fund (SMSF) sector is now being formally recognised on more than one front by the big players in the market, including the Federal Government.
The Self-Managed Super Funds Professionals’ Association of Australia (SPAA) has been heartened by the continuing and growing acknowledgment the sector is receiving, in discussions held by the Cooper Review, for example, and also in a recent decision by the Rudd Government to formally recognise the SPAA SMSF Specialist Auditor (SSAud) as an approved auditor.
Trustees of a self-managed superannuation fund (SMSF) are required to appoint an approved auditor to conduct a financial and compliance audit of their fund each year. Superannuation Industry (Supervision) Regulations 1994 (SISR) amendments announced in December 2009 include the formal acknowledgment that someone with the SPAA SSAud qualification is an “approved auditor”.
This amendment allows SPAA’s SMSF Specialist Auditors to undertake audits of SMSFs in their own right. Naturally I was delighted to see that SPAA’s determination to lift the standard of auditing advice and services within the SMSF sector had been formally recognised by the Federal Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen.
The SPAA SSAud program already has a number of accredited members and we’re confident that with this formal recognition, many more practitioners and advisers will now see the inherent value of such a qualification. The SPAA SSAud accreditation program is the only formal recognition of a “specialist” auditor.
Figures from the Australian Taxation Office (ATO) show that there are 11,500 SMSF auditors, but more than half of them audit five or fewer funds each year, and it’s difficult to envisage how these auditors can possibly maintain the necessary knowledge and professional skill when undertaking so few audits.
The SPAA program sets minimum eligibility criteria, including having completed 1000 hours of practical SMSF audit experience in the past three years, of which 500 hours must be in a senior or supervisory role. Alternatively, the auditor must have signed off as the “approved auditor” on 75 or more SMSF audits in the past 12 months.
We’re confident that our unapologetic and rigorous standards for ongoing education will continue to raise the bar for professionals in our industry. We were also gratified to see in the release of the Cooper Review’s Phase 3 Discussion Paper, that many of the very specific issues raised by SPAA had been included.
We are extremely confident that the status of our industry is very positive, with the SMSF industry meeting current government objectives of adequacy, sustainability, longevity and choice. One of the other gratifying aspects to arise from the SMSF Statistical Summary, provided prior to the Phase 3 release, was the ATO citing that it had strong indicators that compliance levels in SMSFs remain relatively high.
This supports our firmly held belief that the majority of people are doing the right thing and effectively governing themselves in an appropriate manner. There has been significant debate around the issue of fraud in SMSFs, but it seems that much of that discussion is at best factually unfounded and, at worst, deliberately provocative.
The fraud issue is one that should be addressed from a national financial services point of view. The truth is that the SMSF sector is no more or less likely to be the target of fraud than any other sector; but there is no doubt that some simple revisions could close even further the small number of administrative loopholes that may attract potential fraudsters to look at SMSFs.
The other great news was the release of the Cooper Review’s Statistical Summary of SMSFs, which showed that the sector’s costs were lower than most in the superannuation industry. The average SMSF member balance was $456,000 and the operating ratio for the average SMSF was 0.69 per cent, down from 0.86 per cent – a fall of nearly 20 per cent. So as we face the year ahead, what do we see on the SMSF landscape?
A strong and growing industry, which now represents the largest segment of the superannuation market, sitting at 31 per cent, or $370 billion, in assets; a sector which enjoys some of the lowest costs in the industry; continually improving levels of education, and the formal recognition of the importance of those standards; and a continuing and growing recognition by the Federal Government of the significance of the SMSF sector.
