SMSFs trustees placed at risk by Govt legislation
Self-managed superannuation fund (SMSF) trustees should brace themselves to be impacted by the Government’s controversial Your Future, Your Super legislation particularly around the proposed new best financial interests requirements and non-arms length income.
That is the warning from the major accounting groups which have noted that while SMSFs will not be as harshly impacted as Australian Prudential Regulation Authority (APRA) funds, they are nonetheless at risk of being exposed to significant penalties.
What is more the accounting bodies have warned that the legislation in many ways represents a throw-back to the dark days when superannuation funds were required by law to invest a proportion of their portfolios in Government bonds in order to access a tax-preferred status.
“SMSF trustees who breach other regulatory provisions could be penalised for breaching the best financial interests duty, leading to concern outcomes,” CPA Australia and Chartered Accountants Australia and New Zealand have told a Parliamentary committee.
“One such problem is the interaction between the proposals and the non-arm’s length income (NALI) requirements for superannuation fund trustees,” it said.
“Indemnifying trustees (and directors of corporates trustees) for normal fund expenses is common across all types of trusts, including APRA-regulated funds,” the submission said. “A trustee which is unable to obtain evidence that a payment to a trustee (or director) of any other party is in a member’s best financial interests may decide not to indemnify that expense.”
“It is possible that a trustee or director who is unable to be indemnified may instead cause the fund to breach the NALI provisions as a result. This would be an unacceptable outcome.”
Like some law firms and major superannuation funds, the two major accounting bodies said they were uneasy about the proposed legislative provisions which would outlay certain payments or investments made by trustees.
“The business of wealth management of which superannuation is a part, involves trustees and investment managers taking calculated investment risks on behalf of members,” they said.
“Although great lengths can be gone to, to management investment and other risks, it is a risk that is assumed to pursue greater investment returns.
“This provision echoes in many ways a requirement, long abolished, where Australian superannuation funds were required by law to invest a proportion of their portfolios in Government bonds in order to access a tax preferred status.”
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
