Treasury has endorsed having a non-prudential regulator, namely the Australian Taxation Office (ATO), govern the operation of the SMSF sector.
The level of engagement members had as well as the flexibility of SMSFs were the main reasons behind the conclusion reached by Treasury in its submission to the Financial System Inquiry.
“A strong appeal of self-managed funds is that they allow individuals the opportunity and freedom to engage more closely with their retirement savings,” the submission said.
“Continuation of the light-touch compliance framework allows individuals to take greater responsibility over their decisions without being subject to the requirements of the prudential regulatory framework.
“This position should be maintained.
“Compliance oversight of self-managed funds should continue to reside with the ATO to ensure self-managed funds comply with all the relevant provisions of the tax law.”
In justifying its position, Treasury pointed out why SMSFs were different to Australian Prudential Regulation Authority (APRA)-regulated funds and as such should not have the same regulation standards.
“The only administrative obligations of self-managed superannuation funds are to lodge a single annual return with the Australian Taxation Office, pay an annual supervisory levy and arrange an annual audit by an approved auditor,” Treasury said.
“The audit requirement is the key compliance mechanism for self-managed funds.
“This differs from APRA’s approach, which promotes financial stability by requiring the institutions it regulates to manage risk prudently to minimise the likelihood of financial losses to fund members.
“Among other things, APRA will require trustees to maintain a risk-management framework and to notify them when the trustee becomes aware of a significant breach of the framework or discovers that the framework does not adequately address a material risk.”
