APRA has no regulatory role to play in SMSF sector: SPAA
9 December 2013: The SMSF Professionals’ Association of Australia (SPAA) has dismissed calls for the Australian Prudential Regulation Authority (APRA) to regulate self managed super funds as being “willfully ignorant” of how this sector works.
SPAA CEO Andrea Slattery says: “The simple fact is APRA’s mandate under the SIS legislation is to regulate funds solely on a prudential basis. The reason for this level of control is to ensure trustees who are removed from fund members have substantial and robust systems in place to protect those members’ interests.
“This differs to SMSFs that have a more detailed and technical oversight to ensure the amounts being accumulated for members is directed to the sole purpose of building retirement savings.
“As the Wallis report recognised, small funds, where the fund member and trustee typically overlap, require a unique approach to achieve the same regulatory outcome as the larger publicly available funds. This is the same as the Corporations legislation where there are different requirements for public and private companies.”
Slattery says for APRA to be allowed to apply prudential principles to SMSFs would result in significant changes in non-compliance because prudential supervision is general and broad based. This only works where large funds are involved due to their magnitude and scale of operation.
“It also ignores the fact that the current regulator, the Australian Taxation Office (ATO), is one of the premier government agencies that competently operates in a high volume processing environment. When you consider there are more than half a million SMSFs, then that’s exactly the type of agency that’s required for SMSFs.”
Slattery was responding to a survey by the publication Super Review at the recent Association of Superannuation Funds of Australia (ASFA) conference that found 75.5% of respondents believed there should be a single regulator (APRA) for all types of super funds, and 74.4 per cent also believed that SMSFs were being inappropriately regulated.
“It really is time this old chestnut was buried once and for all. Where is the evidence to say that SMSFs are being inappropriately regulated? It’s never cited.
“Let’s just remember that when the Wallis Inquiry handed down its report in April 1997, it recommended that the ATO be responsible for SMSFs, and this took effect in 1999.
“Significantly, when 187,000 SMSFs were transferred to the ATO at this time, a report by the Australian National Audit Office (ANAO) said that the ATO suspected that ‘compliance by a large proportion of these funds (administered by APRA’s predecessor, the Insurance and Superannuation Commission), had been poor’.
“ANAO added that the ‘ISC and APRA had undertaken a limited amount of compliance work on these funds in comparison to larger funds’. By 2009, an ATO survey of new trustees found 99% were compliant. From SPAA’s perspective, this is the exact reasoning why the ATO should administer SMSFs.
“Finally, the Cooper Review, in its final report in 2010, said the SMSF sector is ‘largely a successful and well-functioning part of the system’ and made no recommendation for its regulation to be shifted from the ATO.”
The SMSF Professionals’ Association of Australia (SPAA) is the authoritative voice for the self-managed superannuation fund (SMSF) sector. SPAA, which represents professionals providing a range of services across various disciplines in the complex area of SMSFs, is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.