Self-managed super funds will face new independent auditing requirements and an on-market based environment for related party transactions under the Federal Government’s new Stronger Super Reforms, announced today.
The reforms, which follow last year’s Cooper Review of the super system, will introduce independence requirements for SMSF auditors to ensure that audits can be relied upon to provide an objective assessment of a fund’s compliance with the super laws. They will also make it compulsory for related-party transactions to be conducted through a market, or accompanied by a valuation if no market exists, to increase the transparency of these transactions and ensure that related-party transactions are not used to manipulate prices and circumvent tax and legislative requirements.
But the changes have not been fully welcomed by the Self Managed Super Fund Professionals’ Association (SPAA), which says that a ban on off-market transfers between related parties will place the SMSF sector at a disadvantage to managed super funds, such as retail and industry funds.
“SPAA is concerned about the new requirement for related-party transactions to be conducted on a market where one exists,” said SPAA chief executive Andrea Slattery. “While we support the Federal Government’s aims to maintain appropriate oversight of SMSF service providers, ensure fund investments are consistent with the purpose of superannuation and curb fraudulent activity, we note that APRA (Australian Prudential Regulation Authority) regulated funds can still conduct off market transfers and nominate a transfer date, therefore potential for manipulation remains.”
Ms Slattery said a best practice guideline for all funds would have been a more appropriate way of reducing the potential risk of price and date manipulation.
But while SPAA was “disappointed” with the change regarding related parties, it welcomed the introduction of the independence requirements for auditing SMSFs.
“We are very pleased about the approach taken to auditor independence which is sensible, workable and a significant improvement on the more prescriptive approach recommended by the Cooper Review,” Ms Slattery said.
The government commissioned a review of the super system in May 2009, chaired by Jeremy Cooper, and the findings were reported in June last year.
Ms Slattery noted that the government has endorsed the other recommendations from the Cooper Review and welcomed the rejection of standard deeming provisions to automatically deem anything permitted by the superannuation or tax legislation to be permitted by SMSF trust deeds.
Legislation to implement the reforms will be introduced over the coming months.
The Stronger Super Reforms will also make changes to the broader superannuation system, including the establishment of a new default super fund product called MySuper for workers without a nominated fund, the establishment of clearer duties for directors of superannuation trustee boards, and a faster and more affordable process for making everyday transactions through a new SuperStream package of measures.