Powered by MOMENTUM MEDIA
subscribe to our newsletter

SMSF compensation raises ‘moral hazard issues’

Elyse Perrau
22 April 2014 — 1 minute read

An SMSF compensation scheme would raise "moral hazard issues", with trustees potentially not investigating what might be an “appropriate or inappropriate investment”, according to the SMSF Owner’s Alliance (SMSFOA).

Speaking at the Morningstar SMSF Trustee Strategy Day in Sydney last week, SMSFOA chairman Bruce Foy said recently there has been a “push” to have a government fund to pay out trustees in the event of fraud.

“Our position is that it would raise moral hazard issues in terms of people then not investigating themselves what might be an appropriate investment or inappropriate investment,” he said.

Advertisement
Advertisement

“We would not instantly warm to that idea…there are a lot of issues to determine with some sort of guarantee, like what [the compensation scheme] would cover and when you can access it,” he added.

“Generally, this discussion is very embryonic in regards to SMSFs; we don’t want to rush into it.”

SMSF Professionals’ Association of Australia director of technical and professional standards, Graeme Colley, said one of the criticisms of the compensation scheme under the SIS legislation is not every fund that applies for compensation gets it.

“In some cases, some funds get it and others don’t… so it is a bit patchy there,” he said.

SMSF compensation raises ‘moral hazard issues’
smsf logo
smsfadviser logo

Become a pro at SMSF fundamentals and make your clients bulletproof with the SMSF Foundations course. Earn up to 21 CPD hours, and learn directly from Aaron Dunn from Smarter SMSF as he deep-dives into the fundamentals you need to know to successfully undertake your work as an SMSF practitioner. Learn more

join the discussion

Latest poll

Do you have clients that are aged 65 or 66 planning to trigger the bring forward rules?

SUBSCRIBE TO THE
SMSF ADVISER BULLETIN

Get the latest news and opinions delivered to your inbox each morning

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.