TAG Super Tips – Productivity Commission Releases Key Recommendations

 

The Productivity Commission has released its final report assessing the efficiency and effectiveness of Australia’s superannuation system. The key recommendations regarding the SMSF sector are:

Minimum Balance for Self Managed Superannuation Funds (SMSF)

The Productivity Commission’s recommendation:

A minimum balance is too blunt an instrument, but advisers should be prepared to justify to ASIC why they are recommending any SMSF be established with a balance remaining under $500,000 beyond the initial establishment years.

In its draft report, the Productivity Commission recommended a mandatory SMSF minimum of $1 million balance. This was largely opposed by the superannuation industry that argued that lower balances can still generate good returns. In its final report, there is no mandatory minimum but the Commission suggests that balances under $500,000 will need to be explained.

The reduction in minimum balance is welcomed as is the lack of a mandatory minimum. Client specific circumstances can be considered and a lower balance is appropriate in certain circumstances but appropriate financial advice is a must to ensure a client is fully informed.

Specialist Training

The Productivity Commission has recommended that SMSF advisers should have specialist SMSF training. The report stated:

Steps are in train to lift the qualification requirements of financial advisers, and this should be extended to require specialist training for those advising on SMSFs.

Specialist training, like that provided by TAG Financial Services annually to accountants across the country is welcomed, although any additional training load should be managed in light of the new FASEA reforms.

Clear Information for New SMSF

The Productivity Commission’s recommendation:

…. and when a member is being advised to set up an SMSF, the adviser should be required to give them a document that clearly explains key issues they need to consider (‘red flags’) in deciding whether an SMSF is right for them.

It is proposed that clients are given information that clearly explains the pros and cons of setting up a SMSF before they go ahead. We would assume that this already occurs when clients receive financial advice. The ATO also has a number of useful tools surrounding SMSF.

For the full report, go to: https://www.pc.gov.au/inquiries/completed/superannuation/assessment/report

If you have any questions, please don’t hesitate to contact us 

Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page.