Superannuation, Financial Services and the Digital Economy Minister Jane Hume has identified the new duty requiring all superannuation fund trustees to act in the best financial interest of their members as the key element of the Your Future, Your Super initiative for SMSFs.
“Superannuation funds should be held to the highest standards of accountability and transparency and SMSF trustees are no exception. To that end, the best interest duty will be amended to be the best financial interest duty, to remove any doubt about how super fund trustees should use members’ money,” Hume said today during the virtual SMSF Association National Conference 2021.
“This change will ensure that super funds are more accountable for their decisions and prioritise members’ financial outcomes.”
Also speaking at the conference, SMSF Association deputy chief executive Peter Burgess said the proposed introduction of the new best financial interest duty should not be cause for alarm, adding that for SMSFs it would essentially be business as usual.
“[The new duty] is intended to make trustees more accountable about decisions they make around things such as day-to-day operational fund expenditure, investing members’ money, strategic decisions and decisions about discretionary fund expenditure,” Burgess pointed out.
“SMSFs have always been held to a very high standard when it comes to the sole purpose test, and transactions and decisions that could result in members deriving a personal benefit from the use of fund assets have always been heavily regulated and scrutinised.
“Given that members of an SMSF are also the trustees, there is a strong incentive already for trustees to act in their own financial best interest.”
He also warned SMSF trustees who provided financial assistance to members or relatives were more likely to be in breach of the rules.
“It’s situations like this and other transactions involving related parties which may not be done on commercial arm’s-length terms, where SMSF trustees are more likely to be in breach of the requirement to act in the best financial interest of fund members,” he said.
“However, even in these situations, it’s difficult to see how the introduction of this new duty will give the ATO any additional powers to take action against SMSF trustees who breach these rules.
“The ATO already has the power to impose monetary penalties, disqualify trustees or remove the complying status of the fund if trustees breach the rules relating to related-party transactions.”
