Issue: 65
Sent: 05-12-2006 10:02:06
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Lots of technical issues - Tony Negline
Once again a lot has been happening this past week:
a. IFSA Investor Sentiment Research
This report shows some very interesting information about the current state of mind of Australian investors and is well worth a look at.
Of greatest interest is that it shows investors who were contacted more frequently by their adviser were happier with the advice.
All that said great caution needs to be placed on the results of such surveys. The IFSA results don't show how the results were collected. Presumably it was by telephone to fixed lines. This methodology is becoming increasingly unreliable because more and more people only use a mobile phone - most of which are private numbers. Further more and more people refuse to tell the interviewer where they live and an increasing number of people refuse to answer such surveys (this probably has something to do with the ridiculous time of day they ring).
b. ATO Practice Statements
Last week the ATO released three practice statements in relation to SMSFs (practice statements act as a way for the ATO to tell their staff how to administer a part of the law). The most interesting statement involves when the ATO will remove a fund's complying status and hence cause the fund to incur a heavy tax penalty.
c. Recent ATO speech on SMSFs
A couple of weeks ago the ATO published a speech given by Raelene Vivian, Deputy Commissioner for Superannuation given at the recent ASFA conference and the Taxpayers Conference. The speech shows the growth in small funds. The number of SMSFs seems to be growing by about 10% each year. Presumably at some stage saturation point must arise but I don't think anyone knows where that is as the size of the SMSF space is already bigger than most people expected. The ongoing lack of influence of SMSFs on government regulation is a surprise.
The speech also tells us that we can expect to see a series of ATO rulings in relation to super, namely, details on prohibited financial assistance, incidental benefits, business real property and acquiring assets from members. These will all be welcome and will go someway to ensuring we all have a bit more knowledge on how the regulators view the world.
Over the next two years the ATO will increase its staff closely examining SMSFs from 150 to 500.
Last year the ATO looked at over 4,500 funds. In two years time it is hoping to regularly review almost 10,000 funds. This however is still only a small percentage of total SMSFs. To help it ensure compliance with the super laws, those laws require that the fund be reviewed by an external auditor. The ATO want this audit to be vigourous and thorough. A few years ago the ATO said that the external auditors were not doing an adequate job. Auditors are expected to use their professional judgement in working out if they have to report breaches to the ATO. It has recently said that in its view this process has not been working. Expect further refinements in this area soon.
d. Super Reform legislation
Finally, this is the last week Parliament sits. It is likely that some of the super changes legislation will be introduced into Parliament this week. (Many changes will be contained in regulations. Hopefully we will not have to wait too long before seeing a draft of these.)
Finally a colleague has asked me if anyone knows a lawyer who has sufficient experience to do financial services and general counsel work. The person must be able to draft legal documents. The role would be part-time initially but would become full-time in the next 6 - 12 months. It is a Sydney-based role. Please contact me for further information.
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