Super rollover plan for SMSFs

The Australian

27 April 2018

Michael Roddan

Proposed government reforms in the superannuation sector look set to entrench the growth in self-managed super funds in the nation’s nest egg system.

SMSFs will be allowed to expand from four to six members under new laws expected to be announced by Kelly O’Dwyer today.

Along with the changes, SMSF owners will also be allowed to more easily roll over funds electronically using the SuperStream technology — the standard through which money and information is transmitted across the $2.5 trillion super system.

Currently, rollovers through SuperStream can only be done between two funds that are regulated by the Australian Prudential Regulation Authority.

The SMSF sector, which houses around $700 billion in assets, has been pushing for the changes. The proposals will allow SMSF members to roll over funds electronically between a standard APRA-regulated fund and their SMSF.

Ms O’Dwyer is expected to announce the changes at the SMSF expo in Melbourne today.

Following the tax reforms launched in the 2016 federal budget, the Turnbull government has been seen as hostile by many SMSF owners.

Those changes would reduce the overly generous tax concessions given to wealthy retirees with more than $1.6 million in savings, or $3.2m for a couple.

“We appreciate the role SMSFs play in providing competition throughout the superannuation sector by providing an alternative to directing your mandatory super contributions to the larger funds,” Ms O’Dwyer will say.

“We also appreciate the opportunity that SMSFs afford Australians who wish to take a more hands-on approach and exert more control over their own retirement.”

The changes are expected to be included in the upcoming budget in May.

The SuperStream changes are expected to allow members to roll over their funds into an SMSF faster and with lower compliance costs.

The ATO has been tasked with implementing the reform, which is expected to commence late 2019.

Self-managed super funds now make up almost 30 per cent of the $2.5 trillion super sector with funds being set up at the rate of 2800 a month.

Total assets in SMSFs grew by 65 per cent to $697bn in the five years to 2017. More than 1.1 million Australians now have SMSFs.

There is a growing focus on the performance of SMSFs in Australia, with many owners with balances of less than $1m reporting underwhelming investment performance while being charged onerous fees.

The royal commission has also uncovered many instances where customers of financial advisers were told to set up SMSFs in circumstances that may have been against their best interests, due to the conflicted remuneration to be garnered by the financial adviser.