The SMSF sector should have been incorporated into the financial advice education and professional standards that were introduced into Parliament last year, according to an industry consultant.
The measures had overlooked a gaping need for similar compulsory academic and professional requirements for trustees, JWW Consulting founder John Wiseman pointed out.
With nearly 30 per cent of Australia’s $2.1 trillion of super funds in SMSFs, it was incomprehensible current and potential future trustees were not required to complete appropriate academic courses and maintain an ongoing regime of professional development, Wiseman added.
“Trustees should be required to have a minimum level of education to undertake an SMSF, and both the government and industry should be concerned by this lack of financial literacy and competency,” he noted.
“Investing in shares or buying/selling property inside SMSF frameworks is simply not an undertaking for the amateur, unqualified practitioner as the taxation implications and adverse impact on retirement nest eggs can quite literally be catastrophic when mistakes are made.
“‘The cop on the beat’ in relation to non-compliant SMSFs is the ATO, who can impose penalties and punish trustees without the prospect of losing half their accumulated retirement savings in penalties.”
In many cases, the penalty imposed on a non-compliant trustee was an education directive and order to take an education course at the trustee’s expense, he said.
He likened the current SMSF situation to requiring an unlicensed driver to undertake a course to obtain a licence only if they were involved in a road accident.
“Regrettably, the real-life casualties when these financial accidents occur are invariably the spouse, family members, disabled/financially dependent children, business partners, et cetera,” he said.
“The reality is so many hastily implemented SMSFs will invariably cost more in lost opportunities, not to mention taxation repercussions.
“It’s therefore imperative that the government introduce legislation mandating trustee training courses, initially for new SMSFs, as soon as possible.”
He pointed out the ATO already had such a program in place, but working with the SMSF Association and other specialist training groups could address the situation more quickly.
That would remove the education burden from the ATO and ultimately safeguard the many thousands of vulnerable SMSF members where their skills were simply not up to scratch, he added.
“The complexities around member payments is becoming a huge issue when situations such as death, disablement, retirement, split families, blended families and many more occur,” he noted.
“To have these responsibilities in the hands of someone who is not competent and academically qualified is a disaster waiting to happen and in the end the only winners will be the legal fraternity as these situations will invariably end up in the courts.”
