The federal government will introduce a range of measures to protect consumers when establishing SMSFs as part of wider reforms resulting from the collapse of the Shield and First Guardian master funds.
The protections were announced today by Assistant Treasurer and Financial Services Minister Daniel Mulino in an address to the National Press Club and further outlined in detail in a fact sheet released by Treasury, where he noted more than $100 million had been lost by SMSF investors as a result of the Shield and First Guardian failures.
The specific measures will have a strong emphasis on actions that take place when a new fund is established and will include giving powers to the ATO to prevent rollovers to new SMSFs in situations where the regulator is investigating concerns of fraud, financial abuse, misconduct or potential harm.
As part of these powers, the ATO will share data with the Australian Securities and Investments Commission to identify such behaviour sooner.
Trustees will also be required to undertake mandatory education prior to registering a fund, with the government to support industry-led initiatives to improve standards across the sector, and SMSFs will be required to hold uniquely identifiable bank accounts to identify fraud risks.
“These reforms will build on and reinforce work already underway with the sector, including the SMSF Association’s efforts to uplift trustee education and support better-informed decision-making,” Mulino said.
The reforms will also focus on the intentions of trustees and any professional advice they receive by requiring an SMSF to have a written investment strategy at the time of set-up, with further consultation to take place on improving the quality of those strategies.
“We are also going to improve transparency around SMSF outcomes by requiring newly established SMSFs to disclose any financial adviser involved in their establishment and by adding a dedicated line item to SMSF annual statements identifying advice fees deducted during the year,” the Minister added.
“We will also align the first SMSF ATO supervisory levy with fund establishment and increase the levy for the first time since 2013 [from $259 to $295] to help ensure the ATO is appropriately resourced to engage with new trustees, identify emerging risks and intervene where members may be at risk of financial harm.”
Additionally, the ATO will support SMSF trustees, particularly those with low balances, in understanding the annual return from their fund in comparison to members of Australian Prudential Regulation Authority-regulated funds.
“These reforms are targeted at preventing harm, not creating red tape for Australians who choose to manage their retirement through an SMSF. For the vast majority of trustees, they reflect practices already in place, allowing us to better identify at-risk consumers and interrupt harmful practices,” Mulino said.
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason