Well, just when you thought Santa Claus doesn’t exist, along he comes and delivers an early Christmas present to restore your faith in him. The gift I’m referring to is Treasury’s decision to scrap its plans to make trustees ensure the financial statements for their SMSFs are prepared 45 days prior to the lodgement of the fund’s annual return.
As pointed out in my last editorial, this ridiculous proposition would have placed additional and unwanted administrative pressure on SMSFs and in some cases may have made compliance with the requirement near impossible.
Thankfully though common sense has prevailed for a change, with Treasury proving it does not have a tin ear by ditching the idea, and that huge sigh of relief you may have heard last Tuesday was the SMSF industry unanimously welcoming the decision. Nevertheless, it is still frustrating some bureaucrat in Canberra made us all go through a period of angst for no good reason.
Well that’s the present referred to in the headline of this editorial and the task goes along similar lines, and that is to see if this bout of pragmatism and intelligence continues into the future. To this end, the federal government and its agencies have been provided with another set of facts to demonstrate their commitment to this new way forward.
I’m referring to a piece of research released a few weeks ago providing an in-depth look at SMSF running costs. The study was performed by actuarial firm Rice Warner in conjunction with the SMSF Association and SuperConcepts and concluded SMSFs with an asset balance of $200,000 or above are just as cost-effective as any public offer fund.
Further, the report indicated in situations where individuals have retirement savings assets of $500,000 or more, SMSFs are actually the cheapest super fund option in the market.
Why is this significant? Well back in 2018 the Productivity Commission handed down a finding that only SMSFs with a balance in excess of $500,000, originally $1 million before industry criticism, were comparable on performance with public offer funds. As you can tell, this new study blows that conclusion out of the water.
Further, in October 2019, the Australian Securities and Investments Commission (ASIC) also bought into the debate with an instrument saying the average annual running cost of an SMSF is $13,900.
To put this figure into some context, the Rice Warner study indicates the annual cost of running an SMSF with an asset balance of $200,000 using a high compliance administration service is $2457 and $3078 for funds using a full and comprehensive administration service. I’m sure you’d agree there is quite a discrepancy between these numbers and the $13,900 ASIC touted.
So now we have this data, the next question has to be how it will be used by the government and its associated agencies and that’s the task we all have – to monitor Canberra’s progress on this.
Basically it is up to all of us to ensure the nation’s capital is no longer allowed to demonise SMSFs and disadvantage the sector via policies based on misinformation, like that illustrated above, designed to favour every other superannuation segment.
I say let the scrutiny begin.''