As we’ve entered a new calendar year, it may be helpful to consider what changes might be on the horizon over the next while.
The rise and rise of regulator data collection
As we all know, unlike SMSFs, Australian Prudential Regulation Authority (APRA)-regulated super funds are prudentially regulated. That is, the regulator’s job is to check that the interests of arm’s-length members are being protected and fund trustees are using their best endeavours to advance those third-party interests.
It is reasonably clear that the government bureaucracy thinks the data it receives from the super industry is too old to be useful and probably provides an inadequate handle on what is actually going on within large super funds.
To that end, not long before Christmas 2017, APRA said: “The current reporting collection has significant limitations that inhibit consistent understanding of how RSE (registerable superannuation entity) licensees [that is, APRA-regulated fund trustees] are spending RSE assets.”
It said that as a result it would be adjusting its prudential standards governing APRA super funds, which these funds legislatively must comply with, because “the publication of more detailed and accurate data in this area is fundamental to supporting APRA’s supervision of, and improving confidence in, the superannuation industry”.
APRA also said that then publishing this data publicly “will also support improved RSE licence decision-making, accountability and transparency”.
Similarly just before 2017 ended, the government announced some refinements to the super guarantee (SG) regime to ensure greater employer compliance. As part of these announcements, it reiterated that from July 2019, single-touch payroll would apply to all employers, including small businesses.
And we should also remember the increased data gathering the ATO is imposing on APRA-regulated super funds about contributions, benefit payments, transfer balance account and total super balance reporting, with much of this data being sent to the ATO soon after the end of each month.
Thus far, SMSFs have largely avoided getting tangled up in requests for more frequent and accurate data. And in some ways this is entirely justified because SMSFs are smaller entities and are nearly all based around a family.
As we all know, the tax laws provide a large array of reporting and other concessions to small businesses, such as simplified business activity statement reporting, pay-as-you-go withholding and payment remittances, depreciation allowances, longer annual return lodgement deadlines and so on. Logically, similar reporting concessions should apply to SMSFs.
One retort to this is that the government is providing generous tax concessions to superannuation and it has a responsibility to the community to make sure these concessions are not being wasted.
To this I respond that the government gives generous tax concessions when we sell our homes and, thankfully, unless something untoward might be occurring, it shows no interest in knowing how each of us chooses to live and doesn’t seem to care if we discard these concessions.
Nevertheless it is reasonable to assume the government will continue to push SMSFs for more data, more frequently. It might argue the costs of supplying this data because of technological advancements will be minimal post implementation.
Super benefit access rules
You might have heard the government is reviewing the rules that allow super fund members to access their benefits before retirement. It namely wants to look at the rules governing compassionate and financial hardship cases. But we think there is an argument to review the release laws governing temporary and permanent disability, death and retirement. In particular, we think the retirement rules are unnecessarily complex, especially about ongoing intentions to be gainfully employed.
The royal commission into misconduct in the banking, super and financial services industry
The letters patent for this royal commission excludes by exception SMSFs from its inquiry. This is probably a good thing because SMSFs are small entities and most would lack the resources or time to engage with the commission.All other financial services sectors will need to keep a close eye on the commission. Most banks, insurance companies, large super funds and many other players will need constant legal representation and board and executive oversight of this commission of inquiry and any demands for evidence and other documents. For these organisations, the royal commission will be a significant distraction.
We can only hope any proposed regulatory changes the royal commissioner recommends are actually implemented to improve the regulatory environment.