Elite Super Solutions principal Kim Quach left her comfort zone and established her own SMSF practice. She tells Krystine Lumanta what she thinks of this year’s surprise budget measure and why switching to a three-year audit cycle will result in no winners.
How did you get your start in the industry?
I graduated with a Bachelor of Commerce from Monash University with majors in accounting and economics. I started my career at BGL Corporate Solutions in 2004 and by the end of 2006, I became a certified practising accountant. I was a superannuation manager at Mutual Trust from 2009 where I worked alongside many financial planners and family office clients. I learned new skills there and gained a greater appreciation of the complexity of multi-generational family affairs. The borrowing provisions under section 67 of the Superannuation Industry (Supervision) (SIS) Act were introduced in September 2007 and I seized the opportunity to present this concept to some of our clients who were interested in using their super monies to purchase properties. After five years there, I started a family but I knew I wanted to continue in the SMSF sector because I could see opportunities for those with technical knowledge and skills. In 2013, I started my own SMSF specialist practice while raising my young family. Within two years I became RG 146 compliant in superannuation, completed an SMSF specialisation course with University of NSW, became an SMSF specialist with CPA Australia and received both SMSF specialist adviser and SMSF specialist auditor accreditations with the SMSF Association. I became a registered SMSF auditor in 2014 after successfully passing the competency exam while I was six months pregnant with my second child.
Tell me about Elite Super Solutions and what your role entails?
After feeling like I’d gained extensive experience and knowledge, and having been inspired by many successful women in accounting and finance, I established my own business. I’m the director and I’ve employed two contractors. We are an independent specialist SMSF business, providing solely SMSF services to trustees, accountants and financial planners. I manage the daily running of the business, which includes dealing with trustees to ensure their funds are complying with current legislation, working closely with accountants in dealing with all audit matters and liaising with the ATO on any specific issues relating to clients. The bulk of my business is now SMSF audits. As someone who loves the technical aspect of SMSFs, I’m working with accountants and trustees every day in resolving technical issues. And being both an accountant and an auditor gives me a huge advantage in understanding both sides of the equation. We also offer training for accountants and fund administration services for planners and trustees.
"I knew if I ran my own practice, I could service clients the way I wanted. When you’re working for someone in the corporate world, there are restrictions in the way you service your clients. I wanted to create the protocol and the guidelines myself."
What type of SMSF clients do you service?
I’ve got two major client groups: my high net worth private clients where I provide advice and manage their super funds and their compliance, and the second group is for SMSF audits; they’re accounting firms which range from small to medium, with each firm averaging 100 funds. While there’s a lot of related-party borrowing, development and pre-1999 unit trusts with my client base, I enjoy working on anything across the whole SIS Act.
Why did you decide to start your own practice?
I knew if I ran my own practice, I could service clients the way I wanted. When you’re working for someone in the corporate world, there are restrictions in the way you service your clients. I wanted to create the protocol and the guidelines myself. A lot of former clients came over when I left my job after 12 months and that was quite encouraging. Many had told me to start my own business and I didn’t want to give up my career when I became a mum, so I took the plunge. At the end of the day, if you’re really passionate about what you do, all the extra hours you put in doesn’t feel like a chore.
When you started the business is there anything you wish you knew at the time?
While I started the business on my own, I did have a great mentor at the time, who is now retired. He gave me advice on what to look out for and explained certain challenges. Running your own practice is one of those instances of ‘you don’t know what you’re getting yourself into until you actually do it’. One of the biggest things I had to overcome was building a client base. I knew it would be a challenge, but I didn’t know just how hard it was going to be. There was a lot of active marketing I had to do and all of a sudden I was salesperson. Being a technical person behind a desk, it wasn’t something I really enjoyed. But I had to and it pulled me out of my comfort zone, and the experience ended up giving me new skills.
With regard to the three-yearly audit proposal, what are your thoughts on it?
It was quite a surprise on budget night and I looked at it objectively from all perspectives: as a trustee of my own SMSF, as a tax agent and as an auditor. I saw no real winners. This proposal is a real misjudgment and highlights a lack of understanding of the vital role that auditors play in the SMSF sector. The following morning on LinkedIn there was a full-blown discussion among those in the industry. The first person I contacted was [Super Sphere director] Belinda Aisbett to talk about how it could affect our businesses. Looking at it now, my theory is that with all the budget changes made last year, the government believes it’s a way of pleasing trustees, and cutting costs for them seems attractive with the federal election coming up. It’s all very political. I personally think it will be hard to push this measure through. There is so much resistance and not just with auditors and advisers, but even my own trustee clients are not happy with it.
You’re involved in the SMSF Auditors Lobby Group that was established in response to the measure, aren’t you? What does the body represent?
Yes, with Belinda Aisbett heading it up. Within the space of four days we came up as a collective voice to put a submission in. What’s come of this proposal is the industry getting together to say it’s not right. This goes beyond fees; it’s about the integrity of the whole system. Also, it goes against everything the government’s built up over the last five years like introducing the auditor’s exam for licences and [clampdowns] on low-cost audits not meeting the basic standards. So all these things have been harped on about and then all of a sudden, they decide to let funds go for two years without being audited? It’s a complete flip.
What’s the biggest challenge for the industry in the next 12 months?
With the $1.6 million transfer balance cap now in effect, there is undoubtedly stress across the industry with event-based reporting commencing. This is like going back to the future with reasonable benefit limit reporting, pre-1 July 2007, and this places pressure on the ATO administration in managing each member’s total super balance across the entire super industry. Further, with the introduction of the lifetime limit as to how much an individual can transfer into a tax-free pension account, it is crucial advisers have an in-depth understanding of death benefit payments. In particular, advisers need to be aware that the commencement date of a death benefit for transfer balance reporting will vary depending on whether the pension was reversionary or non-reversionary. The ATO confirmed its position on payment of life insurance proceeds and the value that would be credited to the member’s transfer balance cap. With reference to Law Companion Ruling 2017/3, the commencement value of a death benefit income stream includes any proceeds from a life insurance policy. Therefore, where a pensioner passes away with a non-reversionary income stream, the amount of the insurance payout will be included in the commencement value. In contrast, where there is an automatic reversion, the value of the income stream counted against the transfer balance cap is the account balance on the date of death, excluding any life insurance proceeds as this will not be received until after the date of death. The other major change from the 2016 budget that came into effect on 1 July 2017 was the abolishment of the segregation method for SMSFs with a member in pension phase and a total super balance in excess of $1.6 million. Advisers in the industry need to be across this change to ensure the correct pension tax exemption is calculated for the 2017/18 financial year and onwards.
If you could change one thing about the SMSF sector, what would it be and why?
I’d like to see greater restrictions on certain types of investments trustees can enter into. At present there are no specific laws that preclude trustees from purchasing any type of investments, provided there is support for audit purposes and the investment fits within the fund’s investment strategy and satisfies the sole purpose test. Mandatory education for trustees on their role and responsibilities would also be very welcome. I’ve seen many trustees manage their own SMSF with very little to no knowledge of the compliance issues, and more importantly the consequences of a fund being made non-complying by the ATO.