Sector criticism groundless

The SMSF Association has hit back at recent accusations the sector is lawless or inherently risky, stating such labels do not represent how this segment of the industry operates in practice.

To this end, SMSF Association chief executive Peter Burgess indicated the sector exists within a strict framework of regulatory oversight.

“The ATO undertakes risk-based assessment of all new SMSF registrations, using data matching and behavioural indicators to identify higher-risk cases,” Burgess noted in a blog post on the industry body’s website.

“The ATO also effectively exercises its disqualification powers to remove individuals who are not fit and proper to act as SMSF trustees, preventing them from operating an SMSF and posing a future risk to the sector.”

In addition to the regulator’s activities, he pointed out funds must undergo a mandatory independent external audit every year performed by an Australian Securities and Investments Commission (ASIC)-registered auditor, a requirement that provides another layer of sector oversight.

“The ATO and ASIC also regulate the SMSF auditor population through registration, monitoring and enforcement activities, upholding audit quality and independence,” he said.

“This combination of independent audit and regulatory oversight demonstrates that SMSFs operate within a structured and actively supervised regulatory environment.”

With reference to recent product collapses that have resulted in significant consumer losses, such as those involving the Shield and First Guardian master funds, he warned against using these situations to draw conclusions such as labelling SMSFs lawless.

“Recent high-profile cases of consumer loss have not been driven by the SMSF structure itself, but by the conduct of those promoting or facilitating high-risk or conflicted investment arrangements. Aggressive sales practices, poor advice and inadequate oversight of investment products are the common threads. This distinction matters,” he explained.

“Attributing these outcomes to SMSFs risks conflating misconduct with the vehicle through which investments are made. In doing so, there is a real risk that any policy response that focuses on SMSFs will not address the behaviours that give rise to harm.”

According to Burgess, confronting misconduct directly is the only way in which consumer harm can be addressed and not by targeting a particular segment of the superannuation industry.

“Getting this balance right is critical. The long-term strength of Australia’s superannuation system depends not only on protecting consumers, but also on preserving confidence, competition and choice,” he said.