Tag: SMSF

ATO ‘spread very thinly’, says Australian Institute of Superannuation Trustees

The ATO is “spread very thinly” in terms of monitoring SMSF compliance given the size and evolution of the sector, according to the Australian Institute of Superannuation Trustees.

AIST’s executive manager, policy and research, David Haynes says that since the Wallis Inquiry, SMSFs have grown to represent a “far larger proportion” of the superannuation system.

The Stronger Super program of reforms has led to increased responsibility for government agencies, including the ATO, APRA and ASIC, he added.

“It is necessary in that context to then review the relationship between all of the regulatory entities to make sure that they operate efficiently in relation to each other and to the industry and that there’s not unnecessary duplication or overlap or indeed gaps in the operation of the system,” Mr Haynes said.

Mr Haynes said he also believes APRA-regulated funds are subject to greater levels of scrutiny and regulation than ATO-regulated funds.

“Our position generally in relation to SMSFs is that they need to operate on a level playing field with the rest of the super industry,” he said.

“So our position is not one of opposition to SMSFs, it’s all about supporting measures that support the integrity of the system.”

Mr Haynes also reiterated calls for a “minimum level” of education akin to RG146 for SMSF trustees. He said it has “long been” AIST’s position that education requirements for trustees should go further.

“We think just as there is education starting with [RG146] in relation to people who work in the superannuation industry there should be a minimum level of trustee obligation,” Mr Haynes said.

“It’s one thing for people to get the benefit out of the system, but they also need to understand the responsibilities that are associated with it. So there needs to be some level of training that’s [commensurate] with that,” he added.

My Opinion:

I think the Australian Institute of Superannuation Trustees seems to foget the major difference between a self managed super fund and othe funds; trustees of a smsf are looking after their own money. Calls for a “level playing field” are not appropriate becuase smsf’s are different.

Keep SMSF property investment in perspective, says SPAA

The role that self managed super funds (SMSFs) are playing in the current surge in residential property prices needs to be kept in perspective, says Graeme Colley, Director Technical and Professional Standards, of the SMSF Professionals’ Association of Australia (SPAA).

Colley says despite all the market talk of SMSFs flooding into residential property, the actual numbers reveal it’s still a small percentage of the sector’s $500 billion in assets under management.

“At June 30, property in SMSFs consisted mainly of non-residential property such as commercial property ($58 billion) compared with residential property ($17 billion) out of total of $495 billion. At $17 billion, that’s 3.4% of all SMSF assets.

“In addition, gearing is not the issue its critics allege. According to ATO statistics, geared property in SMSFs makes up less than one half of one per cent (0.4848%) of their total investments.

“It would take a huge shift in investments to influence the real estate market compared with individual investors who use negative gearing to purchase property.”

Colley says SPAA welcomes the current debate because it highlights what SPAA has consistently said – that SMSF trustees need to get professional advice before using gearing to invest in property.

“Property is not an inappropriate investment per se, but it must be appropriate to the fund and consider the member’s circumstances, just like all investments whether they are via an SMSF or personal investment decisions outside superannuation.

“In a low interest environment people are looking for better opportunities for investing, a natural reaction to move out of a low earnings investment. Property is an alternative to interest rates on cash, fixed interest type investments and term deposits, and there are still fears about just how robust the sharemarket is.”

Colley adds that ASIC has said that all investments made by an SMSF, including property, requires advice from a licensed financial adviser. “This requires an examination of whether the investment is appropriate to the circumstances of the fund and its members.

“However, individuals do not require advice from a professional adviser to consider their particular personal circumstances before they invest in geared property. This means a higher risk is associated with the investment and the lenders experience a higher rate of default than the strict lending policies that are imposed on an SMSF.”

 

From SPAA

ATO warns trustees on related party issues

Despite acknowledging a majority of trustees are “responsible and compliant”, the Australian Taxation Office (ATO) has warned it will be taking a comprehensive approach to loans, related party transactions and audits.

Speaking at the Institute of Chartered Accountants Australia (ICAA) National SMSF conference in Melbourne yesterday, ATO assistant deputy commissioner of superannuation Stuart Forsyth said its “strong message” is to be vigilant with related party dealings.

“Related party dealings are almost invariably what gets us excited, [including] loans to members or transactions [trustees] shouldn’t have done,” Mr Forsyth said.

“If you’re running a plain vanilla fund [and] you’re not making loans to members, you will have very little issue with the ATO,” he added.

With 20 to 25 per cent of all contraventions reported being loans to members, if penalty laws are introduced in the new parliament, the ATO will run a marketing campaign detailing that a loan to a member is a breach, Mr Forsyth said.

“People get confused [by] the five per cent test and the fact that you can lend to a related entity five per cent of the assets,” Mr Forsyth said.

“But very few of the loans we see to members are under five per cent. So that’s not really why they’re confused. They are simply dipping into the money. We take, as you can imagine, a fairly dim view of that.”

Limited recourse borrowing arrangements (LRBAs) are also cause for concern, with trustees not always entirely aware of the associated complexities and timing issues.

“We’ve seen far too many cases of people who have gone out on the weekend and bought a property. Then they go see the adviser on the Monday and they have the contract already. And sometimes the fund doesn’t exist yet,” Mr Forsyth said. “There’s a lot to do very quickly.”

The ATO will also be focusing on low-cost audits, he added, with concerns that they may not be offering a comprehensive or adequate service.

“Marketing is often, in my experience, just that – it’s not really what’s happening,” he said.

However, Mr Forsyth acknowledged 85 to 95 per cent of SMSF trustees are responsible and compliant, “which is an acknowledgement of the work of advisers”.

Speaking about the future directions of the sector, Mr Forsyth said demographic issues would continue to shape policy.

“There will be increasing focus on the retirement age that you can take out your superannuation tax-free and the ages which pensions can commence,” he said.

“Longevity is a big issue and demographic challenges aren’t going away, but I am confident that the industry is well placed to continue to deliver.”

 

From http://www.smsfadviseronline.com.au