What proposed superannuation protection reforms could mean for SMSF Trustees

Key points:

• Proposed superannuation protection reforms include measures that may impact SMSFs
• Existing SMSF trustees should be aware of possible enhancement of investment strategy requirements and prepare for modest additional costs.
• Our Melbourne Investment Services team is already applying several proposed safeguards in practice.

The Australian Government has announced further reforms under its Protecting Consumers in the Superannuation System agenda, aimed at strengthening protections across the superannuation, advice and investment ecosystem.

These are particularly relevant for individuals who currently have, or are considering establishing, a self-managed superannuation fund (SMSF). While further consultation and detail are expected, the focuses are stronger governance, improved trustee education and greater focus on protecting members from fraud, financial abuse and poor investment outcomes.

What may change for existing SMSFs?

For existing SMSF trustees, the reforms may increase expectations around the quality of fund investment strategies. Details of this measure and the practical impacts are not yet known.

The proposed changes also include an increase in the annual SMSF supervisory levy from $259 to $295. In addition, SMSFs may become contributors to the Compensation Scheme of Last Resort in years where a special levy is required, with the Government indicating the cost for each SMSF would be minimal.

What may change for people looking to establish an SMSF?

For individuals considering an SMSF, the establishment process is likely to become more rigorous. Proposed measures include mandatory trustee education before registration, requirements for uniquely identifiable bank accounts and a written investment strategy from the outset.

The Australian Taxation Office may also be given greater ability to prevent rollovers into new SMSFs where concerns exist around fraud, financial abuse, misconduct or potential consumer harm. This measure is intended to protect members, although further detail will be important to understand how legitimate rollover requests will be managed in practice.

How Pitcher Partners Melbourne Investment Services is already responding

The Pitcher Partners Melbourne Investment Services team already undertakes a number of practices that align with the intent of the proposed reforms. This includes requiring SMSFs to hold uniquely identifiable bank accounts and strengthening the quality and usefulness of SMSF investment strategies by requiring written strategies upfront.

These steps are designed to help trustees maintain clearer records, support more informed investment decisions and demonstrate that the fund’s strategy is appropriate for its members, objectives and circumstances.

What should trustees consider now?

SMSF trustees should continue to monitor the reforms as further detail emerges.

Please contact your Pitcher Partners representative if you wish to review your existing arrangements or have any queries.