The new best financial interest duty (BFID) requirements appear to be aimed at Australian Prudential Regulation Authority (APRA)-regulated funds and should not trouble SMSFs as their core purpose will ensure trustees are compliant, an SMSF legal expert has claimed.
SuperCentral self-managed superannuation executive consultant Michael Hallinan said the introduction of the BFID in schedule 3 of the Treasury Laws Amendment (Your Future, Your Super) Act applied to super fund trustees and included industry, retail and self-managed funds.
Hallinan said for the latter the changes were not significant and “this assessment is on the basis that the purpose of superannuation funds is to provide capital for retirement”.
“Consequently, the powers and duties of the trustees of super funds must be exercised or performed having regard to this purpose (and only this purpose),” he said..
“Qualifying the best interest requirements with ‘financial’ does not affect the purpose of super funds.”
He said the BFID changes also extended to payments to third parties, but the addition of that provision still did not change the position and purpose of a superannuation fund.
“Any third-party payment can only be made to further the primary purpose of the superannuation fund,” he said.
“As super funds must be audited, a payment to the auditor for this service – which is an example of a third-party payment – furthers the primary purpose of the fund. “However, if the audit fee was excessive – that is materially greater than an arm’s-length fee – then the excessive payment would not be a payment furthering the purpose of the fund.
“This would be the case whether the new section, s52B(2A) [of the Superannuation Industry (Supervision) Act], applied or not did not apply.”
He said the BFID requirements appear to be directed towards retail and industry superannuation funds and the latter in particular.
“These changes may have an impact on the behaviour of the trustees of these funds, particularly as the burden of proof in legal action based upon a breach of the ‘best financial interests’ requirement is on the trustees to establish that there was no breach,” he said.
The introduction of the BFID replaced the requirement for super fund trustees to perform their duties and exercise their powers in the best interests of the beneficiaries of the fund and was hailed by Superannuation, Financial Services and the Digital Economy Minister Jane Hume as a key element of the Your Future, Your Super initiative.
Following its introduction, the ATO noted SMSF trustees should have few problems in meeting the requirements and BT SMSF strategy national manager Neil Sparks noted advisers could also play a role in ensuring trustees meet their obligations under the changes.