Sent: 20-10-2009 10:31:01
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Revised Stats, Tax Agents and Tax Efficiency
There are three issues that I would like to discuss this week.
1. You might re-call a previous issue of this publication when I discussed the release of some ATO data on Self Managed Super Funds.
I pointed out that the APRA data for all funds showed that net rollovers and transfers in 2007/08 were -$1.6b and according to the ATO they were -$3.0b.
The two negatives didn't seem to make sense to me but I did say that I'm sure there was a rational explanation for the differences.
A couple of weeks ago the ATO amended their original data set for Self Managed Super Funds. They are now saying that net rollovers and transfers for super funds were $11.4b.
I'm sure the difference between -$1.6b and +$11.4b can be easily explained. For example perhaps it is due to timing differences in the way transfers in and out are recorded by the different types of funds. The difference might also be explained by some information released during a speech that I discuss below.
2. The ATO has published a speech given by Stuart Forsyth (Assistant Commissioner of the SMSF sector) in September. In this speech Mr Forsyth said that, "Compliance results from 2007-08 and 2008-09 income tax reviews and audits indicate a high percentage of misreporting and calculation errors within SMSF annual returns. Since tax agents lodge most SMSF returns, this would indicate that some agents either have a low level of basic knowledge of SMSF income tax issues or they are not taking a reasonable amount of care when preparing the annual returns."
Mr Forsyth's comments were directed at the correct reporting of items on an Self Managed Super Fund's tax return not the regulatory return (which are now both in the one document).
Presumably if errors are being made in one area of a return they are being made in other areas as well. Does this then go someway to explaining the apparent differences in net transfers and rollovers between super funds?
We can expect to hear more about this poor reporting issue moving forward and other matters Mr Forsyth raised in his speech.
3. I was interested to read that the Health Employees Super Trust of Australia (often just known as HESTA) has taken to "measuring and remunerating Aussie equities fund managers by making them accountable for the tax implications of their decisions".
HESTA say they are the first Australian fund "to use this method of measurement and remuneration for its Australian share portfolio."
I have never understood the financial services industries almost cavalier attitude to tax management. Our marketing material bangs on about minimising tax. But then when the rubber hits the road the amount of actual bare knuckled tax management appears to be ... negligible.
The total super industry worth more than $1.1tr. Why has this basic professionalism taken so long? Perhaps if industry funds weren't so focused on their phoney war with retail funds and financial advisers they might have done something about this fundamentally important issue by now.
I'm not sure what excuse retail funds might proffer.
In my DIY Super column in 2007 I wrote in relation to super fund tax management, "there are no pats-on-the-back from the regulators or industry prizes for being tax efficient." This comment remains depressingly true.
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