The application of an annual performance test to SMSFs would offer no value to members already aware of their fund’s status, the SMSF Association (SMSFA) has stated in rejecting a suggestion it be extended to cover the sector.
The association made the claim in a submission to Treasury in response to a consultation paper examining proposed reforms to the Your Future, Your Super performance test, which applies to Australian Prudential Regulation Authority (APRA)-regulated funds.
The paper noted SMSFs sat outside the test, whose intent “is to assess the performance of an investment vehicle where an agent other than the member is responsible for the asset allocation or investment decisions”.
In its response, the SMSFA addressed only question 34 of the consultation paper, which asked: “Do you agree that the ‘other products’ outlined above are unsuitable for testing?”
It stated it did not support the introduction of a performance test for SMSFs and “to do so would create unnecessary regulatory burden, red tape and add further cost to the system for all stakeholders, for little benefit”.
The submission highlighted that individual SMSFs were closely held, private funds where all members were a trustee and held a number of obligations, including the duty to act in the best financial interests of the fund’s beneficiaries.
“Trustees are responsible for administering the fund and its investment strategy,” the SMSFA said.
“Direct control and responsibility to the management of fund investments lies with the trustees. As such, each SMSF will have bespoke investment strategies, driven by the unique needs and risk profiles of its members.
“Different investments, even within the same asset class, may provide regular income, capital gains or a combination thereof. An investment time horizon must also be considered and will vary considerably as will the risk appetite of trustees and fund members.
“The uniqueness and nature of SMSFs makes the benchmarking of individual funds challenging and of little value.
“The trustees’ existing duties and obligations require them to consider the needs of members and the fund’s investment strategy. This coupled with the advice services they receive, and the statutory, professional and ethical duties imposed on those professionals, further safeguards the sector.”
