The Australian superannuation system is regulated by the Australian Taxation Office (ATO), the Australian Securities & Investments Commission (ASIC), and the Australian Prudential Regulation Authority (APRA).

The ATO regulates self-managed super funds (SMSFs) with the aim of safeguarding the retirement income of those Australians who choose to manage their own super.

Financial services (that might provide services to SMSF trustees) are regulated by ASIC, while APRA looks after large super funds other than SMSFs, such as retail and industry funds. However, APRA does get involved with SMSFs when it comes to assessing claims for the release of retirement benefits on compassionate grounds.

The ATO is responsible for making sure DIY super funds comply with the super laws. The ATO will not evaluate your investment choices, but it will make sure your fund’s activities keep within the super and income tax laws, and specifically, that its sole purpose is to provide retirement benefits.

SMSFs are a tax effective means of saving for retirement because of lower rates of tax on contributions and capital gains when in the accumulation phase, or zero tax for those in the pension phase.

SMSFs must submit an annual tax return to the ATO, including an audit undertaken by an independent auditor.

If the ATO identifies a breach, it will generally work with the trustees to rectify the situation. However, trustees who fail to make an effort to comply may be disqualified and their SMSF may be penalised with a higher tax rate, a fine, the loss of its complying status, or legal action.

For more information, read How your SMSF is taxed or Key rules for your SMSF. Or sign up to the Switzer Super Report to receive expert commentary on the latest changes to ATO regulations as well as investment advice for SMSF trustees.

 

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should, before acting, consider the appropriateness of the information in regards to their objectives, financial situation and needs and, if necessary, seek professional advice.