The ability of SMSF members to manage their own superannuation also makes them more vulnerable to people who would engage in financial abuse as they lack the regulatory oversight available to funds overseen by the Australian Prudential Regulation Authority, a parliamentary report has stated.
The report, “Financial abuse: an insidious form of domestic violence”, was released by the Parliamentary Joint Committee on Corporations and Financial Services yesterday and called for the government to “review the intersection between financial abuse and the superannuation system, particularly in relation to SMSFs” using input from victim-survivors of abuse.
The recommendation was made as the committee noted the Superannuation Industry (Supervision) (SIS) Act and SIS Regulations do not permit super funds to consider financial abuse and SMSFs had a greater risk of this taking place due to the way they were regulated under the ATO.
“As SMSFs are designed on the premise of self-protection, there is reduced government intervention through regulation. As members of SMSFs protect their own interests, these funds are subjected to a less onerous prudential regime under the SIS Act,” the report stated.
“In circumstances of family violence involving the trustees of a SMSF, there is greater potential for one partner or family member to coerce another into making decisions or managing the SMSF in a certain way, and less external regulatory involvement or oversight to prevent that from occurring.”
The committee also pointed out abuse could occur when a perpetrator stole personal information and committed fraud by establishing a new SMSF in another name and transferring the funds to that account, and victims of theft or fraud could not receive assistance from the Australian Financial Complaints Authority.
The report also recommended the SIS Act be amended so that any beneficiary who has perpetrated domestic or family abuse, including financial abuse, and domestic violence-related suicide, against a super account holder can be declared an invalid beneficiary of the account holder’s superannuation death benefits.
This recommendation stemmed from evidence presented to the committee that under current law if an abuser is an eligible beneficiary, super funds must pay the death benefit to that person and no discretion existed for a fund to withhold payments in circumstances involving family and domestic violence and financial abuse.
“The committee is greatly concerned that, by allowing perpetrators to claim death benefits, the current arrangements effectively allow a perpetrator to continue to commit financial abuse even after death of a victim-survivor, including in circumstances of domestic violence-related suicide,” the report added.
“The committee therefore believes that the SIS Act should be amended to ensure that the payment of death benefits arrangements account for circumstances of domestic and family violence, including financial abuse.”
