Compliance, Documentation, Regulation

More timely SMSF data likely

SMSF data

Data reported by SMSFs will need to be more timely and accurate to enable governments to make better superannuation policy in the future.

An emphasis on more accurate reporting of events and asset holdings within the SMSF sector is highly likely given the lag in accurate data restricts the government from fully assessing the state of the superannuation system, a technical expert has claimed.

SuperConcepts executive manager SMSF technical and strategic solutions Philip La Greca predicted a shift to standardised reporting would become central to the formation of superannuation policy seeing SMSF data currently lagged that of retail and industry funds.

“The government needs to be able to see behavior such as how much people are putting in and what funds are investing in because it has to make decisions about whether these things are good thing for funds to be doing,” La Greca said during a recent briefing to SMSF trustees.

He noted SMSFs represent a quarter of the $3.6 trillion in superannuation but only report once a year and can do that up to 11 months after the end of a financial year.

“When the ATO produces their annual statistics on SMSFs it has to wait for those returns to be lodged.

“The 2020 fund data, released earlier this year, was not fully collected until June 2021 when all the tax returns from 2020 were received and then the ATO spent six months analysing it so we got the data at the start of 2022.

“Imagine you are the government and can’t actually know what SMSFs are doing because you are looking at something almost two years old.

“Contrast that with Australian Prudential Regulatory Authority (APRA) regulated funds.

“They do 36 quarterly reports to the regulator and cover investments, cost break downs in different categories, demographic information about their members, and so on as well as providing transactional information to the ATO within 10 working days.

“Reporting is obviously an issue in this sector, and the shift to quarterly reporting for transfer balance account reports is a perfect example that we will start to see more things that will have to be done more frequently.

“We are not going to get to having to do quarterly reporting on everything but the idea that we’re going to have to do better reporting is almost a given.”

La Greca said this shift to more accurate data would also occur with regard to asset allocations and will probably match the categories adopted by APRA-regulated funds.

“Every quarter, the ATO publishes asset allocation graphs but what we are actually seeing is an extrapolation of data from the last year’s tax returns and some of that data aligns with asset classes,” he noted.

“This means if you are trying to figure out how SMSFs are doing, you can’t benchmark anything to this data [so] we are probably going to have some changes in how we report [it].

He said this change was likely to be a declaration of asset allocations in the SMSF tax return and the adoption of uniform asset classifications.

“APRA-regulated funds now have an investment portfolio disclosure dashboard which effectively classifies assets and those classifications probably can be adopted by the SMSF sector, or they will be forced upon us,” he concluded.

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