The first day of the new financial year will mark the start of some significant changes for SMSFs and their service providers. A raft of legislative changes will impact on how SMSFs operate, with two major changes affecting accountants and auditors.
SMSF auditor registration
Everyone providing SMSF audit services must be registered with the Australian Securities and Investments Commission (ASIC) from 1 July, and while the regime is well under way, there is still a long way to go in ensuring a smooth transition into the new financial year. It is anticipated up to 6000 individuals will seek registration. At the time of writing, around 2000 applications had been approved with another 1600 in the pipeline.
Initially there were hiccups in the registration process, however, the Institute of Chartered Accountants in Australia (ICAA) worked with ASIC to resolve a number of the issues and speed up the process considerably. It still remains to be seen if this new regime will hit the ground running on 1 July, particularly as more complex applications, that don’t easily tick boxes, are probably still outstanding.
It will take time to see whether the registration regime meets its objectives. Jeremy Cooper recommended the introduction of this regime on the basis it is necessary to have minimum standards applicable to all auditors, which are consistently monitored and enforced. The real success of the regime would simply be an increase in audit quality across the board. Treasury has identified the drivers of audit quality as targeted communication and education, on-the-job training, professional scepticism and mentoring. The new registration regime needs to support these drivers to achieve the necessary standards. The role of the professional accounting bodies in driving audit quality cannot be understated through supporting members in education and training.
After years of advocacy by the ICAA and discussions with government and policymakers, legislation for the new limited licensing regime should be finalised shortly. The new limited licence provided by ASIC is due to commence on 1 July and will replace the existing accountants’ exemption from 1 July 2016.
The three-year transition period will give accountants time to assess the services they wish to offer, whether or not they will need a licence and how to become licensed. Many will obtain their own licence, while others may opt to operate under a dealer group arrangement as an authorised representative. At this stage, practitioners should do their research to consider which options are best for them and their clients. Waiting until final details of the legislation are released and ASIC has provided guidance on the operation of the new laws would be prudent. This will be important, particularly in relation to how this licence interacts with other requirements of the Future of Financial Advice reforms, such as the best interests duties.
The ICAA will be working closely with ASIC on these measures and will be providing members with resources and assistance.
SMSF trustees, their service providers and employers also need to be cognisant of several legislative changes from 1 July. From this date, the superannuation guarantee (SG) charge will start its ascent to 12 per cent with a 0.25 per cent increase and the upper age limit for payment of SG will be removed.
It will be a requirement for SMSFs to report assets at market value, the SMSF levy will increase to $191 for 2012/13 (and further increase to $259 in 2013/14) and the investment strategy requirements will include regular review and consideration of insurance for members.
Expected to commence is the ban on acquisition and disposal of assets by SMSFs and related parties. While some deficiencies in the draft legislation have been resolved, the practical implications are yet to be revealed – difficulties with valuations and dealing with unmarketable parcels of shares, particularly when trying to wind up a fund.
Finally, the new Australian Taxation Office (ATO) administrative penalties will apply, including monetary penalties and mandatory education or rectification orders. It’s expected the ATO will look at trustee behaviours and the type and extent of any breaches, rather than have a strict liability approach to penalties.
Change is a constant in superannuation and the new financial year will mean more change for the SMSF industry. Trustees and practitioners must be vigilant and stay educated to ensure the continued success of this sector.