Removing the ability for an SMSF to undertake off market share transfers provides an unfair advantage for APRA Regulated Funds.
It is just over two years since the Super System Review chaired by Jeremy Cooper got underway. Yesterday (21 September 2011), after lengthy consultation with the Stronger Super Peak Group, the Government via Minister Bill Shorten have made decisions on key aspects of the Stronger Super reforms.
Self Managed Super Funds were one part of a broader review in the governance, efficiency, structure and operation of Australia’s Superannuation System.
For SMSFs, many of the recommendations from the Cooper Review were endorsed by the Government in their response back in December 2010. Further information about the Stronger Super response can be found in previous posts and training sessions:
- Blog post – Cooper Super now Stronger Super for SMSFs; and
- Webinar – Stronger Super: impact for SMSFs
I along with many within the SMSF industry have been vocal against the recommendation made by the Cooper Review Panel to remove an SMSF’s ability to receive in-specie contributions or in-specie transfers of listed shares (see my previous post, “Cooper Review Panel off the mark with off market transfers”).
The recommendation made by Cooper was that “… where an underlying market exists, all acquisitions and disposal of assets between SMSFs and related parties must be conducted through that market.” The Federal Government in their Stronger Super response in December 2010 supported this recommendation.
Through the consultation process of the Stronger Super reforms, the appointed SMSF Working Group strongly objected to this recommendation. Furthermore, several professional bodies, including SPAA put forward a framework in which to address the concerns raised by the Panel around potential abuse of contribution caps and capital gains tax. This framework should have resulted in a similar outcome that was finally resolved with SMSFs investing in collectables. It is my understanding discussions were very positive that an appropriate framework would be resolved to allow for off market transfers to continue. These discussions have obviously ended disappointingly for many, with the Peak Group (excluding SPAA) ultimately supporting the recommendation to remove the SIS section 66(2) exception.
The statistical summary into SMSFs was a positive step for the industry as it debunked many of the myths around SMSFs – that they were full of Ferrari’s, artwork on people walls at home, etc… Unfortunately, I think that this change has been made on “hear-say” rather than statistical justification. Only in recent times has the SMSF Annual Return captured in-specie transfer information. I’m still unaware of any compelling data that justified this decision against SMSFs.
A more sensible approach would be to adopt a set of industry based guidelines to legislate on the issue for all superannuation funds to ensure that there is no manipulation of contribution caps or capital gains tax.
I feel that it’s important to keep lobbying on this issue to ensure that there is an even playing field for SMSFs and listed shares.