The SMSF Association has hit out at what it considers an industry myth that the sector of the superannuation industry made up of self-managed funds is unregulated.
“There are many myths around SMSFs, often being spread due to a lack of knowledge about the sector, and the notion of an unregulated SMSF sector is at the top of this list,” SMSF Association head of policy Jordan George said.
“As SMSF trustees and their specialist advisers well know, the SMSF sector is rigorously regulated by two key government agencies: the ATO, which administers the relevant superannuation laws for SMSFs, and the Australian Securities and Investments Commission (ASIC), which regulates financial services to protect consumers and registers SMSF auditors.”
According to George, the fact 98 per cent of SMSFs met their compliance requirements on an annual basis was proof the ATO was a highly effective regulator.
The ATO’s regulatory responsibilities for the SMSF sector include having to verify a fund satisfies the sole purpose test of paying retirement benefits to its members, providing information and documentation to help trustees establish and run their own funds, ensuring SMSFs comply with the superannuation laws, taking enforcement action when superannuation laws are breached, and making sure fund auditors carry out their duties to the necessary standards.
ASIC’s regulatory role regarding SMSFs is to confirm every SMSF auditor is registered and continually meets their eligibility requirements under the law.
It is also responsible for monitoring the financial advisers providing services to SMSF trustees.
George said constant allegations of the SMSF sector being largely unregulated contradicted the Cooper review and David Murray’s Financial System Inquiry, which both confirmed that area of the superannuation industry was in good shape.
“Leaving aside Murray’s recommendation to ban LRBAs (limited recourse borrowing arrangements), neither inquiry found there was any systemic issue threatening the viability of the SMSF sector – further evidence that the regulatory regime is working effectively,” he noted.