With a growing number of self managed super funds, it is without question that adequate resources are required to ensure that SMSFs remain as a well-functioning sector. It is with some concern however, that the cost of regulation may soon become a barrier to entry, in particular where these costs are increasing against administration and compliance costs which appear to be one the decline.
The Mid-Year Economic and Fiscal Outlook (MYEFO) announced an increase to the SMSF supervisory levy from 1 July 2013 to better reflect the true cost of regulation of the SMSF sector. Interestingly, this Superannuation Legislation Bill has been referred to the Parliamentary Joint Committee (PJC) on Corporations and Financial Services to conduct an inquiry.
So, is the increase to $259 from 1 July 2013 justified?
Interestingly, at the SPAA National conference in Melbourne last week, it was indicated that some 500 SMSF trustees are expected to undertake some form of mandatory education as a result of compliance breaches to their fund. This training will be conducted online and at no cost. NO COST? Of course there is a cost and it appears everybody is paying for it… It must be asked why such costs are borne by all trustees when the large majority are doing the right thing?
This change to the levy has got me thinking whether a flat fee supervisory levy is the most appropriate way to regulate the sector? Have a think about some of the alternatives:
- Could the supervisory levy be risk-rated, whereby the supervisory levy is subject to the fund’s previous compliance history?
- Should the supervisory levy be tiered based on a fund’s value?
What other alternatives do you think could be appropriate?
The following diagram outlines the changes to be imposed on SMSF trustees regarding the increased cost and timing of collection of the supervisory levy: