|Summary: The future of super under the Abbott Government is being unveiled – slowly, but surely. And SMSFs will be relative winners.|
|Key take-out: The minister overseeing superannuation, Arthur Sinodinos, released a discussion paper last week, and is seeking more independence on the boards of industry super funds.|
|Key beneficiaries: SMSF trustees and superannuation accountholders. Category: Superannuation.|
What is said before an election, whether promises or stated intentions, means little. It’s what gets delivered afterwards that’s counts.
Superannuation has not been on the front pages since the election: in fact, it’s barely made the mainstream papers. But that doesn’t mean that the new minister overseeing superannuation, Senator Arthur Sinodinos, has not been active.
After 2½ months in the job, it’s becoming clearer what an Abbott Government has in store for superannuation. For self-managed super funds, it’s largely positive.
Industry funds shake-up
Last week, Sinodinos launched a discussion paper – as dull a read as I’ve had the displeasure of going through.
But this was the start of the shake-up that has been long flagged for industry funds, starting with getting more independence on the boards of super funds.
Industry funds have always been made up of boards that are half member (often union leaders) representatives and half employer representatives. The discussion paper wants to see governance structures that align “more closely with corporate governance principles”.
The discussion paper also raised the possibility that the introduction of MySuper could be delayed beyond its intended start date of July 1, 2014.
It could also open the MySuper rules to competition. Instead of one MySuper default fund being listed or available through awards, this would be opened up.
Sinodinos is a fan of SMSFs and will be actively encouraging them. However, the government warns that the encouragement for Australians taking control of their own super future comes with a quid pro quo.
What the effectively means is that if you make mistakes, you take responsibility for your actions. The government is not there to bail out SMSFs when things go wrong.
Last week Sinodinos reiterated the government’s position. If things turn nasty, or there’s a question of fraud (such as with the Trio funds disaster), SMSF trustees need to understand that they are taking on that risk.
“I think the first point to make is that, philosophically, we quite like self-managed super funds; people take responsibility for their own savings,” he told an industry breakfast last week.
“But the other side of that is that people in that situation should not expect that the government necessarily comes to their rescue. I prefer them (the ATO) to keep a fairly flexible regime, as long as they (SMSF trustees) understand that taking responsibility for your own savings, means taking responsibility for your own savings.”
SMSFs and property
Since property gearing came into play theoretically in 2007 – but not practically until about 2010 – there has been a constant belief that a fearful government could change its mind.
Jeremy Cooper’s Super System Review recommended an investigation into SMSFs and gearing to have reported back to government by late last year. It would appear that review never went ahead.
This year, the concern for SMSFs and property has been around property spruikers and conflicted advice. With the property market recovery this year, ASIC and others (including myself, see these columns, Beware the property hard sell. ASIC is watching and SMSF property: Understand the risks) have been warning trustees to do their homework.
Sinodinos is not concerned at the moment. Interest rates are low and property prices are rising again, and he doesn’t believe SMSFs are driving the property market higher at the moment.
If there’s an area where a government could act to protect SMSFs, it would be in the property arena. ASIC has strong concerns about elements of the property industry that are targeting SMSFs. And it is acting where it can.
But tighter regulation around who can provide what elements of advice in regards to super and property – particularly where developers are directly selling to trustees – could be crucial. Too many trustees are getting themselves into trouble by falling for highly conflicted advice being provided by “shonks”.
No news here is probably good news. The Abbott Government has said nothing about contribution limits being changed.
At the moment, people turning 60 this financial year have a higher limit of $35,000 for concessional contributions for the FY14 year. This is due to be expanded to anyone over 50 in the FY15 year.
There has been no word on a change to that, so it would appear the over-50s will be able to make higher contributions next financial year.
Opt-in and advisers
Sinodinos has also given a strong indication that the two-year opt-in arrangements regarding fees charged by financial advisers of clients could be ditched.
These were bought in by the Labor government as part of its Future of Financial Advice (FoFA) reforms, which would force advisers to get approval from clients every two years to charge ongoing fees to super clients or face fines. Sinodinos believes it’s a piece of red tape that will not positively assist the advice industry with clients.
Financial System Inquiry
To be chaired by David Murray, former boss of the Commonwealth Bank and the Future Fund, the Financial System Inquiry could have broad implications for superannuation.
And it will be a monster. But to try to guess where that inquiry is going to go in regards to superannuation, beyond the very broad terms of reference, would be pointless.
Murray’s team of four will have to report back to Treasurer Joe Hockey within a year.
What does it all mean for SMSFs?
Largely, the statements and murmurings coming from the new Abbott Government are reasonably good news for SMSFs. There are no direct negatives that trustees need to start worrying about yet.
If anything, the outlook feels positive for SMSFs in a relative sense. It does sound that most of the rest of the industry – that is, APRA-regulated funds – are going to come in for a lot more change than SMSFs.
The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.