The Government has responded to the recommendations of the Super System (Cooper) Review by the introduction of the “Stronger Super” package.
“Stronger Super” is a reform package that sets out the Government’s path for reform of a range of matters in the superannuation industry, in particular, SMSFs and the regulation and approval of SMSF auditors.
Self managed super fund reform
Of primary importance in the reform is the reduction of the incidence of the illegal release of funds from SMSFs. To aid the reduction of illegal release of funds criminal and civil sanctions will be introduced for scheme promoters. Also, any amounts that are illegally released will be taxed at the superannuation non-complying rate with an additional penalty imposed on a case by case basis.
Proof of identity checks will be required for all people joining a SMSF. This will apply to all new funds and existing funds.
Also, legislation will be amended to enable the ATO to enforce the requirement for the separation of SMSF and personal assets.
New regulatory powers for the ATO will be introduced which empower the ATO to penalise breaches of superannuation legislation with a sliding scale of administrative penalties. The penalties imposed will be required to be paid by the trustee and not out of the assets of the SMSF.
It is proposed that legislative standards will be developed and introduced that regulate investments in collectables and personal use assets. These legislative standards will apply from 1 July 2011 and trustees will have until 1 July 2016 to comply.
ASIC is to be appointed as the registration body for SMSF approved auditors and will determine the qualifications and minimum competency and knowledge standards that are required for auditors to maintain registration.
The ATO will, however, monitor compliance with the approved auditor standards.
In order to maintain their registration, auditors will be required to meet independence standards. As part of the reforms, ASIC will review the existing independence standards and develop new standards, if required.
Advisors should monitor the progress of the proposed amendments to ensure compliance with the reforms.
Also, advisors should warn clients of the risks associated with the early release of funds from SMSFs.
Education of clients as to the regulation of SMSFs will assist with minimisation of risks for clients and advisors.