What’s In Store For SMSF This 2015?

 

 

The year 2014 was a relatively quiet year for the Self-Managed Super Funds (SMSF) industry. However, SMSF experts agree that there is much to look forward to in the industry this year because of some possible changes that can be brought about by the following three factors.

Financial Systems Inquiry (FSI) Report

The FSI released their final report in December wherein they made 44 recommendations that could possibly affect the superannuation system in 2015 and beyond. An article on SolePurposeTest, listed some of the most notable recommendations include extending choice of super fund to all employees, a legislated purpose for the supper annuation system, a review of MySuper and a competitive process for default super funds, new retirement income products and reform of super fund governance. However, the most controversial recommendation made was on banning direct borrowing by superannuation funds.

According to an article on the SMSF Adviser, Jordan George of the SMSF Professionals’ Association of Australia states that this recommendation to ban borrowing can affect people’s intentions in setting up an SMSF only if they intended to so with an LRBA (Limited Recourse Borrowing Arrangement) as a substantial part of their investment.

Taxpayers Australia’s Reece Agland, on a separate article on the SMSF Adviser, says that “banning is extreme” and that they will be lobbying to retain borrowing in SMSF but that it should be a “financial product covered by the Financial Services Act”.

Tax Reforms

Submissions on the FSI final reports are being accepted by the government until March 31, 2015. This could possibly include more changes to the taxation of superannuation in the government’s Tax White Paper, which will determine how the FSI’s recommendation to ban loans to SMSFs will be taken up.

Agland states that “the big issue is whether there’ll be caps on some of these tax advantages that high wealth people get, I think that’ll be an issue, so that’s something that will have to be addressed”. He furthers says that “the other issue that the FSI came out saying was that there should be a consistent tax regime across the accumulation phase and the pension phase – whether the government does anything in relation to that [remains to be seen]”.

Professionalism

An article on the Financial Standard in December 2014 reported that the Australian Securities and Investments Commission (ASIC) revoked the registration of 440 SMSF auditors citing incompetence. Of this number, 373 did not undertake the exam while 67 did not pass the competency exam, which was necessary for them to retain their registration.

George says that this has sparked an ongoing debate on professionalism in the industry and that “in 2015 we’ll start seeing that debate shifting to how can we do it and what changes do we need to make to keep pushing professionalism and financial advice forward”. Further, he states that they are expecting changes that might come out of the limited license transition period ending in 2016 as well as on the financial advisers who will transition into the tax practitioner board happening throughout the year.

With all these recent developments, it is expected that the SMSF industry will continue to evolve in 2015. It will be interesting to see how it will all play out in the coming months.