SMSFs protected against fraud, says SPAA
Claims that self-managed super funds (SMSFs) have no recourse against fraud and theft are simply not true, according to the SMSF Professionals' Association of Australia (SPAA).
SPAA chief executive Andrea Slattery said that while SMSFs had fewer avenues for legal action against fraud and theft compared with trustees regulated by the Australian Prudential Regulation Authority, it would be wrong to say they had no available options.
Her comments follow the release of information on the Australian Taxation Office (ATO) website about the legal options available to SMSF members who suffer losses due to fraud or theft.
"For example, SMSF trustees can choose to take legal recovery action against a person or persons who engaged in the fraudulent conduct or theft," ATO stated. "Under Corporations Law, if the trustees received advice or services from an Australian Financial Services Licensee who was involved in the fraudulent conduct or theft, legal options are available."
Trustees may also approach the Financial Ombudsman Service (FOS) if their adviser or other service provider involved in fraud is a member of FOS, ATO suggested.
However, access to these legal avenues does not guarantee a successful outcome and, depending on the circumstances, the fund may receive limited or no compensation.
Slattery also addressed concerns recently raised by the Australian Securities and Investments Commission about SMSFs being oversold by some advisers, with findings that investors with less than $100,000 are being pushed into SMSFs.
"This is simply not supported by the statistics," she said. "The most recent release of the ATO's 'SMSF statistical review' shows the average and median balance of an SMSF member trending clearly upwards since 2006."
The report also shows the percentage of SMSFs with balances under $50,000 has declined from 11 per cent in 2006 to 6.8 per cent in 2010, suggesting no systematic issue, according to Slattery.
