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.

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