SMSFs shunned in trans-Tasman super scheme
Despite strong requests from industry the government hasn’t budged on an exclusion keeping self managed super funds from being able to accept retirement savings transferred over from New Zealand-based accounts.
The government released draft regulations on the scheme for consultation in mid-May, giving industry only a short window to respond, but three of the six public submissions – from the SMSF Professionals’ Association (SPAA), Mercer, and the Financial Planning Association (FPA) – strongly recommended SMSFs be included in the scheme.
SPAA and the FPA each argued SMSFs are strictly regulated under the same laws governing Australian Prudential Regulation Authority (APRA)-regulated funds, with the only difference being the Australian Tax Office is instead the body responsible for ensuring those standards are adhered to.
“The SMSF sector is a well-regulated and well-functioning sector of the Australian superannuation environment and is an appropriate retirement savings vehicle for consolidating trans-Tasman superannuation,” SPAA stated in its submission.
It said the exclusion placed SMSFs at a disadvantage compared to APRA-regulated funds.
SPAA said the restriction was “unneeded and unwarranted”, especially following Cooper Review findings that the SMSF sector is “largely a successful and well‐functioning part of the system”
“SPAA is aware that the findings of the Cooper Review regarding SMSFs may have been unavailable at the time the Memorandum of Understanding was negotiated with the New Zealand Government. However, now that these finding are available to the Government, SMSFs should be regarded as an appropriate destination for New Zealand sourced retirement savings.”
The FPA also questioned why the exclusion remained in place and requested Treasury to disclose the justification for such a decision.
“Further, the FPA seeks explanation for how this decision is in the best interest of the public and the individual member who is transferring their benefits to Australia, even in the circumstances where the initial transfer has been made to an APRA-regulated superannuation fund,” the FPA submission stated.
The draft regulations only allowed for APRA-regulated funds to accept such transfers, and this issue was not changed in Friday’s update. A spokesperson from Minister Shorten's office told SMSF Adviser sister publication InvestorDaily the exclusion remained in place because the international agreement between the two countries did not allow for SMSFs to be included.