The Government's Stronger Super SMSF Working Group has released three new SMSF-related Issues Papers, as part of consulting with industry on proposed reforms. The Issues Papers discuss recommendations made in the Cooper Super System Review regarding amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act), trustee penalties and illegal early release of superannuation benefits.Nicole Siemensma
Stronger Super Reforms are the Government's response to the Cooper Super System Review. The reforms aim to achieve efficiencies in the Australian superannuation industry — the ultimate objective being to improve the retirement benefits of all superannuation members.
For a detailed overview of the Stronger Super Reforms and how they affect SMSFs, see our previous ClearLaw article "Stronger Super — setting a path for future reform of the Australian Superannuation Industry".
The Cooper Super System Review recommended the following amendments be made to the SIS Act to address problems that currently exist under the SIS Act:
Amend provisions relating to acquisitions and disposals between related parties of SMSFs so that:
Amend the SIS Act to require SMSFs to value their assets at a net market value (as defined in the Australian Accounting Standard 25 — Financial Reporting by Superannuation Plans).
Publish a set of valuation guidelines, in consultation with industry.
Remove provisions which create unnecessary administrative burdens for SMSF trustees. The idea here is to align SMSFs with the rules applying to small and single member proprietary companies, for which meetings, minutes and other formalities have been reduced to a minimum.
Amend provisions to automatically deem anything permitted by the SIS Act or a tax act to be permitted by an SMSF's trust deed. This would reduce the need for SMSFs to update their trust deeds every time there are changes in the law.
Require the separation of SMSF assets from personal, or employer, assets. These requirements will be in a SIS Act operating standard which will give the ATO the power to enforce the separation of assets for SMSFs.
Amend the investment strategy operating standard so that SMSF trustees are required to consider life insurance, and total and permanent disability insurance, for SMSF members as part of their investment strategy.
The Government, supports these recommendations and has posed a number of questions relating to each SIS Act amendment for the purposes of consultation. Please see the Issues Paper for further information.
Maddocks says, that although the reforms will result in greater administrative efficiency for SMSF trustees and should be encouraged, the advantages are reduced by:
The current penalty regime for SMSF trustees who disregard the rules is supposedly not flexible enough to allow the ATO to 'achieve optimal regulation'. Therefore, the Cooper Super System Review has recommended that the ATO have the following new powers to penalise SMSF trustees who breach the SIS Act:
The Government supports these recommendations and made the following comments for each new ATO power:
Maddocks says that increased regulatory flexibility for the ATO is to be encouraged, but only alongside:
The Cooper Super System Review identified a major issue with illegal accessing of superannuation benefits before a specific event occurs, such as, retirement, severe financial hardship or for compassionate reasons. The Review recommended that:
The Government supports these recommendations and makes the following comments:
Maddocks says, the recommendations make sense provided they are coupled with sensible regulatory policy.
The SMSF Working Group welcomes comments on the above Issues Papers. All comments are due by 31 May 2011 and will be available to the public on the Treasury website (unless requested to be kept confidential).
For more information, contact Maddocks on (03) 9288 0555 and ask for a member of the Maddocks General Commercial Team.
You can read other articles concerning superannuation and SMSFs here.
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Paul is a Special Counsel in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.
Paul's key areas of practice include:
Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.
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