Self-managed superannuation experts say a number of suggestions in the Cooper Review are likely to introduce new regulatory burdens for entrepreneurs who use SMSFs, leading to an increase in compliance costs.
And while the industry has praised the review’s approval of the current state of DIY super, many say a number of “improvements” are, in some cases, redundant.
Dan Butler, director of DBA Lawyers, says there are two major issues that could increase costs for funds.
The first is the Cooper recommendation that accountants advising on the creation of self-managed funds should hold financial services licenses.
Currently there is an exemption for this, but the review suggests this should not be replaced by any new exemption. Butler says this is only going to increase costs.
Under the recommendations, accountants will no longer be able to give advice about DIY super unless they hold a financial services license. Many accountants have been able to generate good business by setting up these types of funds, and Butler says they will now have to pay more to continue doing so if the recommendations are put into law.
“This is definitely going to be a cost that is passed on. Getting rid of the accountants’ exemption means there will be training costs and so on. There are a number of issues here, and certainly higher costs will come as part of that.”
Liz Westover, head of superannuation at the Institute of Chartered Accountants, also says this recommendation is troubling.
“We’ve always supported that the exemption should go, because it doesn’t work, but it needs to be replaced with something that will give people access to affordable, simple advice.”
The second major issue, which Westover says is a “significant” problem, is the new recommendations for auditors.
The review states the Australian Securities and Investments Commission should register approved auditors, and also develop a set of competency standards with a penalty regime put in place.
Additionally, it recommends the Australian Taxation Office police the new standards and share any information gained with ASIC.
But Westover says this is overkill. She claims 95% of all SMSF auditors are part of the three professional accounting bodies, and as a result are already required to comply with a number of auditing requirements.
“There are a lot of measures already in place that seem to have been overlooked. Approved auditors are already covered by a set of robust requirements, and the suggestion that the industry needs a separate set of requirements is overkill – particularly with other measures in place.”
Instead, Westover says information on the audit of a fund should be given directly to the ATO, instead of a tax agent, which will reduce the need for further regulation. “We simply don’t need any extra regulation.”
Butler also says the review’s call for a ban on art and collectibles from DIY funds, and a subsequent five-year phasing out period, is unrealistic.
“Getting rid of in-house assets over a five-year period is unrealistic. A 10-year period would have been more of a practical period. I’m very concerned about the ramifications of that.”
Butler also says the recommendation of an annual levy for DIY funds to use the Superannuation Complaints Tribunal was disappointing. “There is no clear complaints or resolution system other than the general courts, which can prove costly and time-consuming.”
But other DIY experts say the changes are needed. Sharyn Long, chairman of the Self-Managed Super Fund Professionals’ Association of Australia, says the auditing requirements are needed and extra costs won’t necessarily follow.
“Our view is that improvements in the standards of auditing are appropriate. We’re very much for that, and we welcome the need for registration. I don’t know that it will increase costs, but you will see a higher standard.”
Long says the need for auditors to be approved will weed out those firms that aren’t doing their jobs properly.
The report, which says the SMSF industry is “well-functioning”, also recommends a number of other regulatory framework changes:
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
