SMSF Owners’ Alliance executive director Duncan Fairweather was an SMSF trustee for 16 years before he became part of the consumer advocacy group. He tells Darin Tyson-Chan how important it is to make sure the right changes are made to the sector.
How did your involvement in the SMSF sector happen?
I’ve had an SMSF since 1997, so I’ve had some experience in running one from that point. But I only got involved with the SMSF Owners’ Alliance a couple of years ago after I had retired from my previous job running the Australian Financial Markets Association. At the time, I was thinking about what to do next and one of my former chairmen, Bruce Foy, said he thought there was a need for a body that represents SMSFs or the owners of SMSFs in particular. He’d been looking around the market and sensed there was going to be a lot of policy change coming up and he’d been looking for an SMSF organisation he could join and couldn’t find one. At that stage he wasn’t aware of the Australian SMSF Members Association and found he couldn’t join the SMSF Association because he wasn’t a certified professional. So he thought we should start a body for SMSF owners and that’s what we did.
Was there any one particular concern that prompted the establishment of the SMSF Owners’ Alliance?
Yes. At the time, the then treasurer Wayne Swan was saying “we’re going to get the budget back into surplus next financial year”. This was in 2012 and Bruce and I agreed there was no way they’d be able to do it unless the government found a big pot of money somewhere and there was a big pot of money in superannuation. As such, we thought there was a need for SMSF owners, who’ve got the skin in the game and who actually own the money, to have a voice, so we started the SMSF Owners’ Alliance up.
Were your concerns justified?
Well, Bruce’s perception proved to be quite prescient because early in 2013 you may recall that there was in fact a proposal from the Labor Party to tax superannuation earnings over $100,000. It wasn’t implemented basically because it was practically difficult to implement. We came out strongly against it at the time and we maintained the rage right until the point the present government came in and ditched it with other tax measures which were sort of in the pipeline.
So lobbying the government is the SMSF Owners’ Alliance’s single focus?
Absolutely. We see ourselves having a very finite, very direct mission and that is to be an advocacy group to as best we can represent the interests of the 1 million Australians who are owners of SMSFs. We don’t claim to represent them all because clearly we don’t have a million members, but we do think we’re speaking up in their interests. We started out with a board of six members, who sort of knew each other, all involved in business in Sydney. While we tend to be a bit Sydney centric, we do profess to be a national organisation and do have members from different states.
And how was the group’s presence announced?
We wanted to start with something substantive. We didn’t just want to put out an announcement saying “here we are, look at us”, so we prepared quite a lengthy submission to the pre-budget process in the beginning of 2013. We released it in January 2013 and at the same time announced our existence. That submission basically said the government doesn’t have a revenue problem; it’s got a spending problem. It recognised the government quite rightly spent money during the global financial crisis to keep the economy afloat, but what they’d done is kept on spending. So it doesn’t have a revenue crisis; in fact, revenue has been going up year by year. It’s still going up. In fact, revenue is at record levels, but the spending line has been rising at an even faster rate and it’s only now this government is only starting to bring it down. So that submission is how we launched our presence.
How large is your current membership?
We’ve got what we call a support base of about a thousand people with various categories of membership. If you add them all up, you get to about 1000. It’s not growing as fast as we would like, but it is growing steadily.
And how has the organisation been received?
The reaction has been very positive and we’ve been successful in getting people to understand that there is a real threat insofar as they’ve saved and built their retirement nest egg under certain rules and those rules are likely to be changed. There’s certainly a serious prospect for those rules to be changed to their detriment. We think it’s important to be clear about the purpose of superannuation in terms of making people financially self-reliant and independent in retirement.
Do you think governments will have the discipline to recognise the purpose of super and not see it as a fiscal lever?
Well, we’re very encouraged by the strong and clear statements that the Prime Minister [Tony Abbott] and Assistant Treasurer [Josh Frydenberg] and the Treasurer [Joe Hockey] have made in the recent weeks about having no intention to increase taxes on superannuation. We’ve gone into this tax white paper process and there will be recommendations coming out of that and they haven’t ruled out picking out some good ideas. Josh Frydenberg said they’d look at the good ideas that come out of it and that’s encouraging. We were disappointed when the Labor Party in opposition announced they would be putting a new tax on super because they hung it on this unfairness point and we just don’t think that’s valid. And that’s not to say the superannuation system can’t be improved and we think it can. But the whole tax fairness discussion is a bit of a red herring because we should be focused on what’s the best system for the great majority of Australians and how do we encourage more people to accept responsibility themselves for their own retirement, so as to reduce the drain on the budget from publicly funded pensions, which should be for the people who really need them. So we’re all about increasing opportunity for people to save into super rather than omitting them.
Is dispelling some of the myths about SMSFs part of your organisation’s role?
Absolutely, and to give you an example, we’ve been very focused on refuting the claim tax concessions in superannuation are costing $32 billion because that’s one of the starting points of the argument that the whole thing is costing too much and its unfair. It’s a myth about super that’s being pushed by people who are putting a particular point of view and they’re misusing an official number and Treasury has clarified that by saying “look, this number has no policy significance”. You can’t draw policy conclusions from it or base policy proposals on that number because it’s an artificial exercise they go through. If you wind back superannuation tax concessions, you’re going to have less money flowing into super, you’re going to have less earnings, which means less tax coming back there and you’re going to have more pension payouts.
In the short history of the SMSF Owners’ Alliance, what would you say is its most significant achievement?
I think to have been able to establish our presence and credibility with policymakers and people within the industry has been an achievement. Now, we’re not SMSF experts, there are plenty of experts out there, but the value we think we bring to the table is a background of experience in business that allows us to take a different perspective on things. So, I think the fact that we’re very young but we’ve managed to get our head up and get noticed is an achievement. I also think the opposition we put up to the earnings tax proposal then and now is significant. I wouldn’t say the government followed what we thought should happen, but I think we were a factor in the outcome and pretty much the only industry or consumer group that fought the proposal from day one until the end.
What’s the most significant change you’ve seen in the SMSF sector?
The big change in the superannuation sector over the last say 15 to 20 years has been the greater awareness of SMSFs and the fact many people are coming to the realisation they can manage their retirement savings as well as the professional managers, and in fact they’ve proven that they can by the performance. That’s probably the most significant event and you now have a third of the $2 trillion of superannuation sitting in SMSFs.
If you could change one thing about the sector, what would it be?
To minimise change so there’s more stability and certainty in the system. Now, you can’t stop change altogether, you can’t just freeze something, because it’s a growing and evolving system. But when the system is changed, it’s got to be changed for the betterment of the system as a whole and to deliver better results for Australians in general. It can’t be changed because the government is short of money and hasn’t managed its budget well.
Over the coming year, what’s the biggest challenge the sector is facing?
Clearly the outcomes of the tax white paper are going to be very important. The government has made it clear it’s not going to increase the tax on superannuation, but that’s not to say they might not restructure taxation within superannuation. So that potentially could be a big challenge. Also, if there is a change of government, we could find ourselves confronted with a new tax on earnings and that will be a big challenge as well.