Opinions

CPA

The importance of trustee education

Michael Davidson

It seems as if a week hardly goes by without some form of criticism in the media aimed at SMSFs and their trustees. A common complaint is they enjoy some unfair advantage over the large Australian Prudential Regulation Authority (APRA)-regulated funds, despite operating under the same law, or that trustees don’t have the necessary experience and knowledge to run their own super fund and need to be protected from themselves.

Then ever so often there is a call for a minimum or mandatory level of education for SMSF trustees to make sure they know what they are doing – a whimsical notion when you consider the range of experience and knowledge across the spectrum of trustees. From very experienced self-directed investors to complete novices, a one-size-fits-all requirement would be a waste of time for some and too hard for others, not to mention the level of support trustees may get from their advisers and service providers.

Many in the industry probably don’t realise how close we were to having a requirement for mandatory education introduced for SMSF trustees.

In 2009, the then Labor government was close to finalising the introduction of mandatory education and was in discussions with parts of the industry regarding how it would be implemented and who would provide the education.

Luckily, a change of minister and the finalisation of the terms of reference for the Cooper review saw a temporary reprieve, with the review being tasked with considering trustee knowledge, skills and training, among many other topics.

Don’t get me wrong, education is important and would be beneficial to many SMSF trustees, but it should not be compulsory. Trustees should have ready access to cost-effective SMSF education if they need it. Education is not just about improving knowledge, but also understanding your limitations, knowing what you don’t know and, importantly, when to seek advice.

The Cooper review agreed. It did not accept SMSF trustee knowledge was deficient or compulsory education or any accreditation was necessary. It suggested any move in this direction would create artificial barriers to entry.

Cooper did not believe SMSF trustees needed to be superannuation experts. Improving knowledge and competency was desirable, but could be achieved through other means rather than compulsory education, in particular, by improving the knowledge and competency of SMSF service providers and increasing the provision of information and education to enable voluntary education.

Cooper did, however, recommend the introduction of mandatory education for SMSF trustees who breached the superannuation legislation, especially where the breaches were of a low-level nature.

Fast forward four years and since 1 July 2014 the Australian Taxation Office (ATO) now has the power to direct SMSF trustees to undertake a course of education when they have been found to have contravened superannuation laws. Failure to comply with an education directive will result in an $850 administrative penalty.

Trustees can satisfy the education requirement by completing an ATO SMSF webinar or an online course from an approved provider.

One of the first courses approved by the ATO for the mandatory education is the SMSF Trustee Education Program provided by CPA Australia and the Institute of Chartered Accountants in Australia.

It was originally developed by the professional accounting bodies in 2009 in response to the possible introduction of compulsory trustee education with the aim of providing a low-cost course readily available to all SMSF trustees.

The SMSF Trustee Education Program is a free online course available to all SMSF trustees and their service providers and has recently been updated to reflect the latest legislative changes.

The course is based on the SMSF trustee declaration and has seven modules covering trustees’ role and responsibilities, investments, contributions, benefit payments and administration. A certificate of attainment is provided upon completion of the program.

With the ATO now having a broader range of enforcement powers and SMSF trustees personally liable for substantial administrative penalties if they get it wrong, it is more important than ever that trustees have ready access to quality, affordable education if and when they need it.

We hope the SMSF Trustee Education Program is the first of many provided by the industry.

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