SMSF Association backs SMSF levy rise ‘in the short term’

The SMSF Association and several other professional bodies have responded to Financial Services Minister Daniel Mulino’s address at the National Press Club, where he announced a range of reforms for SMSFs, superannuation, and financial advice.

Among the measures is an increased levy for SMSFs for the first time in over a decade. The annual SMSF supervisory levy paid to the ATO – which has remained at $259 since the 2014/15 financial year – will climb to $295. The levy will be brought forward so that it is paid when the SMSF is established.

In addition, SMSFs will be required to contribute to the compensation scheme of last resort (CSLR) in years where a special levy is required, including 2026/27. Mulino indicated that individual SMSFs are likely to contribute no more than $20 per leviable period.

Everyone must shoulder compensation

Responding to this measure, SMSF Association chief executive Peter Burgess said that while the association has always opposed SMSFs paying a CSLR levy, it acknowledged the current situation and the need for the cost of compensation to be spread widely and “be borne” by everybody.

“We do not believe it is fair that victims, including SMSF trustees, still have not received their compensation payments because the regulatory and CSLR funding model has failed them,” Burgess said.

As a stakeholder in the sector, we see the need to step up in the short term, and we would implore the government in the spirit of ‘everybody’ to do the same.

“ASIC has secured a record $830 million in civil penalties, and we believe reform should be considered to redirect a portion of these funds back to the CSLR, just as reform will be introduced to levy the SMSF sector if a special CSLR levy is required in the future,” Burgess said.

The SMSF Association provided broad support for the range of measures announced by Mulino, aimed at protecting consumers, including SMSF trustees, preventing further consumer harm, and ensuring the sustainability of the CSLR.

While noting that reforms like requiring SMSFs to hold uniquely identifiable bank accounts reflect what is generally considered best practice, Burgess warned they could pose practical implementation challenges.

As such, he said it is critical to work through these issues methodically with the sector and other key stakeholders before legislation is drafted, to ensure the measures can operate as intended.

“Importantly, we are also pleased that the government has listened to our concerns and will not be proceeding with cooling-off periods for rollovers to SMSFs, advice fee caps or an opt-in/opt-out CSLR special levy model for SMSFs. These were all options that were previously on the table in the lead-up to today’s final package of reforms,” Burgess said.

Regarding the measure to introduce mandatory SMSF trustee education for prospective trustees, Burgess said the association welcomed the acknowledgement of its efforts to educate and support trustees.

The association said the announcements represent the beginning of further consultation and said it looks forward to being an active contributor while noting that it is vital to get the details right to ensure the reforms are effective.

The Institute of Public Accountants said forcing SMSF trustees to pay a levy "grossly unfair", with general manager advocacy and emerging policy Michael Davison arguing that SMSF members are no different to any other retail investor.

"They are individuals or families who just happen to invest in their retirement through a specific type of government-approved savings vehicle. They have been targeted by these predatory schemes and are victims just like any other retail investor," Davison said.

"SMSF trustees invest their life savings, often based on licensed financial advice – which is regulated by ASIC – just like any other retail investor. They entrust their savings to the product providers and financial advisers and expect them to act in their best interests. They should not have to insure their own savings in case there is misconduct or product failure caused by others, which they have no control over."

CA ANZ said it supports strengthening the CSLR but expressed concern that most SMSFs will be required to contribute despite being ineligible to make a claim.

“The funding arrangements must be transparent, sustainable and fair to both consumers and the sectors required to fund the scheme,” CA ANZ group executive advocacy, public and government affairs, Damian Ogden said.

Recognise role of accountants

CPA Australia supported the proposed reforms to strengthen consumer protections across the superannuation system in response to the collapse of Shield and First Guardian schemes, as well as the proposal to introduce mandatory education requirements for individuals seeking to establish an SMSF.

Noting measures to crack down on harmful lead generation and aggressive sales practices, CPA Australia superannuation lead Richard Webb said the focus on preventing consumer harm before it occurs is a step forward.

"The collapse of Shield and First Guardian highlighted the role that aggressive lead generation, pressure selling and unsolicited approaches can play in exposing consumers to inappropriate products and advice," Webb said.

"CPA Australia supports action to stop unlicensed and conflicted operators targeting Australians' retirement savings. Consumer protection is strongest when harm is prevented before it occurs."

Mulino laid out plans to prohibit unlicensed real-time communications about superannuation and narrow existing anti-hawking exemptions to curb high-pressure sales tactics and cold calling used by some businesses.

However, Webb flagged that the final legislation must clearly differentiate between harmful sales conduct and legitimate professional engagement.

The professional body also supported giving the ATO a targeted power to prevent rollovers to newly established SMSFs while concerns about fraud, financial abuse, misconduct, or potential harm are being investigated.

“Giving the ATO a targeted ability to intervene could prevent serious consumer harm, but the power must be exercised transparently and without unnecessarily delaying legitimate rollovers,” Webb said.

“Clear risk indicators, prompt communication, reasonable decision-making timeframes and appropriate review rights will be essential.”

Education measure welcomed by Heffron

Heffron senior SMSF education specialist Natasha Panagis said in a blog that the “devil will be in the detail” of these reforms, while stating that the SMSF reforms “look reasonably sensible”.

“Some formalise practices that good SMSF trustees and their advisers should already be following. Others, such as the trustee education requirement and additional protections around rollovers, could provide a genuine improvement to the integrity of the sector,” Panagis wrote.

“We still need to understand how the trustee knowledge test will work, what constitutes a uniquely identifiable bank account, how the ATO will identify potentially risky rollovers and exactly what additional requirements will apply to investment strategies and advice fee reporting.”