Business editor, Ian Verrender of ABC News online, allerted us to a less-known Budget proposal, to reduce SMSF annual auditing requirements. He writes –
The details are sparse, the mention brief. But there at the top of page 41 in budget paper number two it sits.
“The Government will change the annual audit requirement to a three-yearly requirement for self-managed superannuation funds with a history of good record keeping and compliance,” it states.
According to the budget papers, it’s all about reducing red tape for the trustees of self-managed funds.
A seemingly minor detail among hundreds of pages dripping with billion-dollar policy shifts, it was a change that escaped the army of commentators assembled in Parliament House last Tuesday to grill Treasurer Scott Morrison on the details of his third federal budget.
It was an odd decision for two reasons. For a start, big, professionally run funds still must be audited every year.
The tax trap
Large, professionally run superannuation funds are overseen by the banking regulator, the Australian Prudential Regulatory Authority.
Self-managed funds, by contrast, are regulated by the Australian Tax Office. While many funds outsource the administration, the fund trustees — usually the beneficiaries — make the investment decisions.
Until now, self-managed funds have been required to have their affairs audited by an independent auditor. It’s not just for financial transactions. The audit also monitors compliance issues.
Given the enormous tax concessions superannuation enjoys, independent auditors have been required to ensure beneficiaries or trustees are not attempting to game the system, to ensure the government isn’t being dudded on tax.
With audits required in only one in three years, some self-managed retirees could succumb to the temptation to manipulate asset values or not properly record cash injections so they stay under the cap and avoid tax.
Those yet to retire may be tempted to withdraw funds temporarily for personal use and repay the cash before the third year when the audit is done.
Retirees at risk
There’s also the potential for self-managed retirees to become prey to an industry that has rewritten the definition of scandal.
In 2009, thousands of self-managed super funds were fleeced by Trio Capital which collapsed owing $176 million, after cash was funnelled offshore. Financial advisers from Wollongong to Port Augusta tipped around 6,000 super fund trustees into the Astarra Capital fund.
While APRA-regulated funds — bank, industry and government funds — cover anyone who has suffered a loss from fraud or theft via levy that is imposed on the funds, no such protection exists for self-managed funds.
A joint parliamentary inquiry into the Trio collapse in 2012 reinforced that distinction. While the government forked out $55 million to those who lost out through APRA-monitored funds, it recommended self-managed super investors receive nothing.
Given the litany of atrocities within the financial services industry, and its scant disregard for its own clients, it seems odd to be scaling back oversight of almost a third of Australia’s $2.6 trillion superannuation industry.
A little bit of red tape can go a long way.
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