Whilst the government continues to apply pressure to individuals to take responsibility for their retirement savings it has also taken a few small steps -albeit long overdue- to improve issues for super associated with, contributions, flexibility for access, spouse contribution splitting and some clarity for super strategies. It may therefore be coming around to the view that if the community is to save more for retirement then the rules should be more conducive to retirement savings. If this is the case then it is better late than never but the road ahead is long and tortuous. The single most formidable obstacle facing savers and one that the regulators have yet to address is a fundamental affliction of superannuation - the rules are too complex. Trustees, advisers and interested parties can attest to the problems that this causes. Simplification will greatly assist the cause of retirement savings.
The ATO and ASIC have raised concerns about the apparent difficulties some SMF trustees have experienced in adequately managing their funds and that a small, 'high risk' group is causing particular anxiety. Thankfully, this group is, relatively speaking, infinitesimally small as a percentage of funds. There are approximately 30,000 SMFSs and the ATO has revealed that over 100 have either had undertakings issued against them, trustees disqualified, or funds wound up this year. The overwhelming majority of trustees seem to have managed their regulatory responsibilities adequately and this is reassuring. Some recent estimates have put the value of the self managed industry at about $165 billion. Even a very small proportion of this asset base is significant and therefore it is perfectly understandable that the regulator should be concerned about any at-risk funds.
The view reiterated by the ATO recently is that in the interests of protecting this significant asset base of future retirement savings in SMSFs it will pursue a campaign of getting tough with SMSF trustees who flout the law. The regulator has made its position clear in relation to wrongdoings by trustees. Where they are involved in breaches that appear to be innocent mistakes and involve a lack of knowledge, it intends to work with them to try to sort things out. However this approach will not be used for those who are seen to be habitual offenders or those who blatantly abuse the law.
This attitude is consistent with information provided in this newsletter in the last 12 months to the effect that the ATO would be adopting a much more hard-nosed approach with trustees who appear to be deliberately ignoring the law. As a last resort the regulator can declare a fund non-complying, with serious implications for the assets of the fund. However, it has stated that it would not pursue this course without good reason but is adamant that this may be necessary to deal with what it sees as a small group who may be deliberately defying the law.
Readers hardly need reminding that trustees have a special duty of care to manage their funds prudently, adhere to the sole purpose principle for self retirement benefits or dependents' benefits on death and are bound by the SIS Act and Regulations. Whilst they may seek professional advice the fund's management is fully their responsibility. A trustee's role is a serious one requiring an ongoing commitment and they cannot be derelict in their duty by walking away from this responsibility!