ATO SMSF segment assistant commissioner Kasey Macfarlane was exposed to SMSFs early in her career when they were known as excluded funds. She tells Krystine Lumanta how the tax office intends to help the sector tackle the new super rules and how she sees the regulator evolving.
What’s your industry background and experience?
After finishing school I started work as a trainee accountant at a mid-size accounting firm in Hobart where I grew up. During that time I studied and completed a Bachelor of Commerce part-time at the University of Tasmania. I’ve also undertaken some postgraduate legal studies. Upon completion of my commerce degree, I moved to Brisbane to work for Ernst & Young in their business services division where I was responsible for providing taxation and accounting services to a range of small and medium businesses. Following a short period at a second tier accounting firm in Brisbane, I started at the ATO in February 1999. I joined because it was a great opportunity to be at the forefront and directly involved in what was a very exciting time in terms of a number of significant transformations in tax policy, including the introduction of the GST. I became a chartered accountant in 1997 when I completed my professional year, with what was then the Institute of Chartered Accountants of Australia, and I continue to hold that designation as an associate member of Chartered Accountants Australia & New Zealand.
How did you come to be involved with SMSFs?
My involvement and interest in SMSFs started very early on in my career. Part of my role as a trainee accountant and subsequently when I continued to work in private practice accounting in Brisbane included providing taxation and accounting advice and services for a number of clients’ SMSFs. But of course back then in the late ‘80s and early ‘90s they were called excluded funds. I take a lot of satisfaction from the opportunity my team and I have at the ATO, and to play a role in a professional and enthusiastic industry that’s committed to ensuring the social and economic well-being of individual Australians in retirement and their later lives. I’ve undertaken the role of assistant commissioner for the ATO’s SMSF client engagement team since April 2015. The opportunity to have a specific role in the superannuation sphere, with superannuation being something that has a direct and tangible and impact on the lives of individuals, was particularly attractive.
What does your role as ATO assistant commissioner of SMSFs entail?
In summary, I lead a team that is responsible for helping, supporting and assisting individuals to manage their retirement savings within the framework of the regulatory and taxation rules that apply to SMSFs, and assuring and ensuring their retirement savings are protected through good governance and regulation of the SMSF sector. A primary aspect of this role is partnering with the SMSF industry and the SMSF profession to provide timely, practical and relevant information and guidance that is easy to access and understand, and which provides certainty for SMSF trustees and their advisers, making it as easy as possible for them to comply with their regulatory and taxation obligations. In terms of SMSF compliance, our preferred approach is to provide support, assistance and education so that SMSF trustees are on the path to good compliance from the outset. We also seek to empower individuals to work with us to promote voluntary compliance by providing support for SMSFs to engage with us and self-correct regulatory issues to get back on track to good compliance. Our SMSF early engagement and voluntary disclosure service is an example of this. Of course, we also quite sensibly but intentionally take strong enforcement action in the small number of cases where SMSF trustees are persistently or deliberately ignoring their regulatory and taxation obligations. This is an important element in maintaining trust and confidence in the regulatory efficacy of the SMSF sector and ensuring a level playing field for all.You often present at SMSF and superannuation events.
What are you generally trying to communicate?
Overall I hope that audiences realise the ATO as the regulator and administrator of SMSFs is not all about wielding a big stick in terms of penalties and sanctions. I also hope that audiences take away an understanding of current information, support and assistance that the ATO has available for the sector, an understanding of the ATO’s tolerance on key issues, including the area of safety where SMSFs can swim in terms of regulatory and tax compliance risks, as well as get a sense of emerging industry issues and risks on our radar.
What can the super industry expect the ATO to look like in the coming years?
Over the past 10 years, the world as a whole let alone the SMSF sector has seen unprecedented exponential advances in technology that has changed our lives that perhaps we could not have even imagined. So in some ways it’s hard to predict what things might look like in three years. Technology will have an even greater role to play in our interactions with clients and how we support and ensure good governance and regulation of the SMSF sector. It’s not too difficult to envisage a future where there is real-time sharing of data between the ATO and industry and vice versa, with SMSF trustees and their advisers being able to access ATO-held information about their SMSF and manage their ATO account and SMSF information through the single touch of a button.
What SMSF issues are taking up most of your time?
At this time, the key area of focus for my team and I is the superannuation reforms that were passed by Parliament in November. Starting in January 2017, we will be working closely with the SMSF industry to provide sufficient information and appropriate support, guidance and certainty for SMSFs and their members moving forward in preparation for implementation of the new measures on 1 July 2017. Limited recourse borrowing arrangements (LRBA) were also quite topical, following the release of our safe harbour guidelines in mid-2016 and the transitional arrangements where SMSF trustees have the opportunity to review and revise their borrowings under LRBAs by 31 January.
Perhaps almost by necessity, any form of regulation brings with it some degree of complexity and subsequent changes to those rules can then also bring a further layer of complexity.
What do you think about the industry’s concerns about the complexity of the new super measures?
I get it and I appreciate those concerns. Perhaps almost by necessity, any form of regulation brings with it some degree of complexity and subsequent changes to those rules can then also bring a further layer of complexity. Through its role in the tax and superannuation system, the ATO is responsible for implementing and giving effect to government policy enunciated through the new superannuation measures. In doing so a key aspect and area of focus of the ATO will be to mask and ease complexities by providing clear, practical, easy-to-understand information and guidance as well as practical tools that make it easy for SMSFs to manage their individual circumstances within the context of the new rules.
Are the new super measures driving the ATO to change in terms of digital capabilities and data accessibility?
As part of the ATO’s vision of seeking to be a contemporary service provider, over the past few years it has been very much focused on improving its digital capabilities and data accessibility. In a broader sense we have already seen implementation of key initiatives such as MyTax for individuals and access to ATO online services through MyGov. There is little doubt that, among other things, the new superannuation measures have heightened the desire and the need for timely access to ATO information – particularly about account balances and how individuals are tracking towards various caps so that individuals and funds can comply with the new measures and understand the consequences of individual investment decisions. This highlights the need for us to enhance the way we interact with the community and where possible make this information available through technology.
What’s the biggest change you’ve seen in the industry, positive or negative?
One of the biggest changes I have seen recently is the significant influence advances in technology have had on the way that the SMSF sector operates. For example, increasingly we are seeing SMSF administrators utilising software to provide individuals with online and real-time access to information and alerts about their SMSF and superannuation account. In the financial advice sector we have seen the advent of robo-advice to assist SMSF trustees to make investment decisions. And more and more we are seeing the use of technology and automated data feeds being utilised by SMSF auditors in undertaking annual independent SMSF audits for their clients. The use of technology in the sector is positive in that it facilitates more streamlined processes and SMSF management. The caution though needs to be that while technology is a useful enabling tool, running an SMSF, making investment decisions and undertaking an SMSF audit still requires judgment. Reliance on technology alone without the complementary application of expertise and judgment could pose a risk to the efficacy of the sector.
If there was one thing you could change about the SMSF sector, what would it be?
As the regulator of SMSFs, we sometimes have occasion to see some very unfortunate and devastating cases where people have lost all or a significant proportion of their retirement nest egg because they have been enticed to establish an SMSF for the wrong reasons.So if there was one thing that I would change in the SMSF sector it would be to ensure 100 per cent of people are able to and do access independent specialist advice before they establish an SMSF and throughout the operation of their SMSF thereafter.
What’s the key challenge facing the sector over the next six to 12 months?
From the ATO’s perspective, the key and imminent challenge facing the sector is preparation for and the implementation of the recently enacted superannuation measures.