Santa, or should I say Minister Bill Shorten has delivered a Christmas gift a little early this year with the Government’s response to the Super System Review (Cooper Review).
The government’s response, known as “Stronger Super” has provided support, or in-principle support for 139 out of 177 of the Review’s recommendations.
Much of the mainstream media focus is on MySuper and to a lesser extent, SuperStream. Self-Managed Super Funds as we know were a significant part of Phase Three of the Super System Review, and in today’s release address the 29 recommendations impacting SMSF trustees and the profession.
I have tabled below the Super System Review recommendations into those that are supported and note supported:
|8.1||No change to the current membership limit of 4 members|
|8.2||Introduction of sliding scale penalty system for ATO as Regulator|
|8.3||Greater powers for the ATO to issue directions regarding specified contraventions|
|8.4||Mandatory education for trustees who have contravened SIS legislation|
|8.6||Development specialist SMSF component to RG146 to increase knowledge and competency of licensed advisers|
|8.8||Approved Auditors to be required to be registered by ASIC, including initial and ongoing assessment of competency|
|8.9||ASIC to develop approved auditor independence standards (in conjunction with industry)|
|8.10||Review of the ability to borrow within superannuation in 2 years’ time|
|8.15||Mandate for ATO to collect and produce SMSF statistics|
|8.16||SMSFs to value all assets at their net market value|
|8.17||ATO to assist in publishing valuation guidelines for consistency and standardisation of practices within the industry|
|8.19||Removal of additional administrative burdens that are unnecessary|
|8.20||Greater identification measures for people joining SMSF, whether setting up or joining an existing fund|
|8.21||Capture of provider information regarding advice in setting up SMSF|
|8.22||Introduction of some naming protocols for SMSFs|
|8.23||Improved processes to allow more efficient rollovers into SMSFs from APRA regulated funds|
|8.24||Introduction of criminal and civil sanctions around illegal early release scheme promoters|
|8.25||Non-complying tax rate to apply to illegal early access amounts|
|8.26||Rollovers into SMSFs to be captured by AML/CTF Act|
|8.27||Amend SIS Act to allow for automatic deeming with SMSF trust deeds (no need to upgrade)|
|8.28||Create a SIS operating standard to require separation of fund assets|
|8.29||Amend investment strategy operating standard to consider life & TPD insurance|
|Support in Principle|
|8.13||Removal of exception to transfer listed shares off-market / where underlying market exists, must sell personally and then purchase within fund. Property to require independent valuer report to be prepared.|
|8.5||No introduction of binding ruling system for SMSFs|
|8.11||Credit providers will not collect and provide information about levels of finance in SMSFs. Will be captured by ATO in their data collection process.|
|8.12||No change to the current In-house asset requirements|
|8.14||No change to SMSFs being able to hold artwork and other collectibles|
|8.18||No change to the member reporting requirements for an SMSF|
|8.7||Removal of Accountants’ Exemption and requiring an adviser to hold an AFSL to establish a fund. This issue is being considered under Future of Financial Advice, and potentially includes a restricted licensing framework.|
This appears to be a great result for the SMSF industry and in particular for fund trustees. SMSFs will continue to be set apart from alternative superannuation structures by their diversification in investment choices, which will continue to include in-house assets, and collectibles (even though they make up a very small overall percentage of SMSF total assets).
These changes are going to involve some costs to the ATO and ASIC. As a result, these costs will be offset through an increase in the annual SMSF supervisory levy (currently $150), with effect from this financial year (2010-11).
Where to from here?
The government will now look to establish an SMSF sub-group from the overarching consultative group in early 2011 to progress the implementation of these SMSF reforms. Initial consultation will focus on detailed design and implementation issues, with subsequent consultation on exposure draft legislation.
Most measures are intended to take effective from 1 July 2012. Tighter legislative standards for investments in collectibles and personal use assets will apply to new investments from 1 July 2011, with all holdings of these asset types to comply by 1 July 2016. AML/CTF changes will take effect from 1 July 2013 and amendments to the registration process will commence on 1 July 2014.
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