SMSFs trustees placed at risk by Govt legislation

25 March 2021
| By Mike |
image
image
expand image

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.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 3 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 1 day ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

2 weeks 5 days ago