SMSF reform could spark long-term challenges

Reform to self-managed super funds (SMSF) could cause greater complications in the sector, says Townsend Business & Corporate Lawyers principal Peter Townsend.

In his response to the Cooper Review’s examination of the SMSF industry and the issues surrounding the self management of funds, Townsend stressed the importance of maintaining the status quo by continuing to allow all members to have a say in how a fund is run. However, he did highlight the need for trustees to be better educated about what to look out for when managing a fund.

In its review into the superannuation system, Phase III of the Cooper Review asks whether the current trust model is appropriate for SMSFs and if the model works effectively for single-member SMSFs. It also asks whether the responsibilities of SMSF trustees for managing their funds affairs should be less onerous than for trustees of super funds regulated by the Australian Prudential Regulation Association.

Responding the points 17.1 and 17.2 of the Cooper Review enquiry, Townsend says questions raised about the current SMSF model and the responsibilities held by members and trustees should not be changed. He said: “The member also being trustee is a sound model and it works. Look at the excellent compliance figures for SMSFs. Self-managed super is designed for closely-held groups — families, in fact. Rather than set a numerical limit, self-managed super should be available to all members of a family who want to operate their super together. All members should be trustees and have an equal say in how the fund is operated.”

Townsend added that any changes to the current model could prove detrimental and cause problems in the long term. He questioned the merit of making SMSFs more complicated to run by having some members who are just members. This will likely make life harder for the adviser, and it could lead to more legal action from members who are not consulted about decisions made for the fund. It would also mean that some family members could dominate others in the fund.”

Townsend added that although the current model worked well, trustees should be better educated about what they need to do when it comes to managing super funds, and what they should be looking for in a professional adviser. But he warned that the focus should not be to turn trustees into superannuation experts. Instead, the onus should be on placing them in a better position to choose quality advisers.