As the amount of money held in superannuation increases and the trend towards SMSFs continues its upward trajectory, more focus is placed on the skills and the ability of those managing their SMSF monies to be able to do their job properly.
There is no doubt that education is a key component of increased levels of competency. However, it may not be the Holy Grail for the success of the SMSF sector.
Certainly, we should not be enforcing compulsory education simply to be seen to be doing something if it is not required. Moreover, could such calls be seen as an obstacle to those wishing to set up an SMSF?
Compulsory trustee training
During the 2009/2010 review of Australia’s superannuation system by Jeremy Cooper and his panel, the notion of mandatory education for SMSF trustees was considered. The findings of that review were very clear: the panel did not believe that SMSF trustees should be mandated to undergo any form of training.
Not only did the panel not believe that SMSF trustees need to be superannuation experts, they also considered that overall levels of SMSF trustee knowledge were not deficient.
The panel was supportive of improvements in SMSF trustee knowledge; however, they felt this could be realised in other ways, including increasing competencies and knowledge of SMSF industry service providers and promotion of information and voluntary education for SMSF trustees. They identified that such education facilities already existed in the form of the accounting profession’s free online SMSF education program.
Artificial barriers to entry
Mandatory education for trustees would create a barrier to entry to the SMSF sector. The Cooper panel supported this position, citing moves to introduce compulsory education as “an attempt to create artificial barriers to entry”.
Mandatory education for some....
Notwithstanding the panel's not supporting mandatory education for all trustees, they were in favour of it for trustees who breached their legislative obligations.
Giving the Australian Taxation Office, as the regulator of SMSFs, power to direct trustees who breach their legislative obligations to undertake mandatory education was a feature of the new penalty regime for SMSF trustees that was due to come into effect from 1 July 2013.
Role of advisers
A vast majority of SMSF trustees use the services of a tax agent every year to assist in the preparation and lodgement of their annual returns. There are also a significant and growing number of accountants, planners and administrators providing specialised SMSF services.
There is no shortage of service providers to assist SMSF trustees in understanding their roles and responsibilities as trustees but also to help them meet their obligations. As identified by the Cooper Review panel, improving the overall competency standards of service providers would be important to ensuring the ongoing success of the SMSF industry.
Education of advisers
The abolition of the existing accountants’ exemption from 1 July 2016 and the introduction of a new limited licensing regime will ensure consistent education of advisers in the SMSF space.
Anyone offering advice on SMSFs, including recommendations for the set-up and closure of an SMSF, will need to be licensed in some form. Part of that licensing will involve training that complies with ASIC’s RG 146 requirements.
For the first time, we will see consistent levels of mandatory education across the wide range of advisers
Criticism has been directed at the minimum levels of education currently contained in RG 146 and this is currently being reviewed by ASIC.
There are many practitioners who are already vastly qualified and experienced in some way but to ensure that we have consistent standards across the board, even these people will need to demonstrate that they have the requisite knowledge and this may mean additional training or assessment.
SMSF specialisation offerings are also currently available that enable practitioners to demonstrate their expertise above any minimum standards that may apply. The value of education cannot be understated.
The answer to the success of the SMSF industry lies largely with the skills of the services providers in the industry. However, this is not simply their own education but also the extent to which they and other industry stakeholders impart their knowledge and encourage their SMSF trustee clients to build on theirs.
Liz Westover is head of superannuation at the Institute of Chartered Accountants Australia.