Review regulations confuse SMSF trustee

SMSF ThinkSelf-managed superannuation fund (SMSF) trustees were uncertain about how often their fund should be reviewed and what constituted a review of the investment strategy, a superannuation executive said yesterday.

The Australian Taxation Office (ATO) introduced measures in August 2012 as part of the prescribed SMSF operating standards, which must be adhered to at all times.

As part of the obligations and responsibilities, the ATO required SMSF trustees to “conduct a review of the fund’s investment strategy on a regular basis”.

However, the interpretation of “regular basis” varied, Super IQ head of sales Bill Davies said.

“You think by now the regulator would actually get to the point and say this is how many times a year they want you to review it,” Davies said at the Australian Securities Exchange Self-Managed Superannuation roadshow in Sydney.

When he asked attendees what they believed “regular basis” meant, a few SMSF trustees and members replied “once”.

“What does it mean from an ATO perspective?” he said.

“They have told me they want to see you do that three times a year, but that’s up to you to decide.”

The importance of reviewing the SMSF investment strategy was another area of ambiguity for trustees, he said.

“It’s not rocket science, but I can tell you that the amount of people that do it once a year and once a year only is the reason why people are now getting caught by the regulator,” he said.

“It means [all members in the SMSF] need to sit down, look at the investment strategy and then decide that the investments in your fund still meet your requirements.”

When he asked attendees who managed the administration of their own SMSF, almost half the room raised their hands.

In a recent conversation, he said an SMSF trustee was frustrated over the reporting and administration obligations and could not understand why they were required.

“The regulator wants you to look at your investment strategy and review it with an understanding that what you’re doing is indeed in the best interest of the trustees,” he said, adding the reason for setting up an SMSF in the first place was for the benefit of their retirement.

“So imagine if you didn’t do this and your fund lost all its money.

“The reality is, the government doesn’t want the baby boomers to lose their money, therefore it wants you to review the investment strategy on a regular basis to make sure you’re doing the right thing.”

By: Krystine Lumanta

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