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.
Andrea Slattery is chief executive officer of the Self-Managed Super Funds Professionals’ Association of Australia.