As a professional body, the Institute of Public Accountants (IPA) puts a lot of effort into lobbying government in relation to proposed measures. It is hard work, but we do so not merely to represent the interests of our members, but also to take a public interest perspective in our efforts.
All that work is worthwhile when you can convince the government or other decision-maker to shift their thinking and adopt your point of view. It validates the work of the professional bodies.
One issue concerning the IPA has been the government’s proposal to require SMSFs to use a market where one exists in relation to off-market transfers or if there is no market, to require a qualified valuer to value the transaction. The SMSF sector has opposed this measure because it would impose significant additional costs on running an SMSF, while being discriminatory in that it is not imposed on other forms of superannuation.
The IPA is of the view that this was just another example of the government’s lack of understanding of the SMSF sector and attempts to interfere in a market that is operating perfectly fine. We are concerned those from competing sectors, in particular the industry fund sector, are able to influence policy that affects other market participants but not the industry fund sector. The principal rationale for the proposals is that the current arrangements allow for arbitrage as to the date and price that assets are said to have been transacted. In other words, it allowed trustees to set the date of the transfer to a date with the most effective price. This is manipulation that the system shouldn’t allow.
The professional bodies agree there is an opportunity for the unscrupulous to be involved in arbitrage, but there is a cheaper and less-intrusive alternative. This would require strengthening the current valuation rules and better enforcing those rules. The profession didn’t merely oppose the measure, but identified an alternative means of addressing a potential issue. There is an opportunity to improve the valuation rules and enforce them. Such a proposal is likely to be a more effective and less costly solution both for funds and regulators. It also removes the necessity for legislative changes.
Where possible, reform should be through soft-touch mechanisms before there is consideration of the need for legislative changes. If the same outcome can be achieved at lower cost and without legislative changes, it should be supported. Legislative change should be the last, not first, resort for reform.
Another problem with the proposed legislative changes is in relation to valuers. The measure requires assets without a market, which includes many types of assets in an SMSF (such as antiques and other valuables), to be valued by an expert valuer. The problem is that for many of these types of assets there are no actual valuers for those assets. Without a valuer there is no way to value the assets and the fund would not be able to dispose of these types of assets.
Even where there is a valuer, it may be relatively expensive compared to the totality of the assets involved. There were no plans for a de minimus rule, where assets are of clear low value. It is not something other forms of superannuation, such as industry funds or retail funds, would be required to do.
All of these issues were made known to the government and Treasury, but the commitment was there to continue. However, even when lobbying doesn’t reach government, it can reach others. In this case it was the opposition, which was of the view the legislation as proposed did not work. The opposition even referenced the work of the professional bodies in convincing it of the errors of the proposed legislation.
What this shows is there is value in lobbying efforts to get rid of bad legislation. With an upcoming election, it is important the IPA and other professional bodies continue to lobby the government, opposition and the bureaucracy to ensure good policy, and where there is bad policy to fight hard against it. We welcome the government’s movement on this issue and the opposition taking on this issue and forcing the government’s hand.