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Self Managed Super Fund (SMSF) Article
Cooper Review sheds light on changes

By Tony Negline.

This article may be out of date.

19th May 2010

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Two weeks ago the Cooper Review released a preliminary report into Self Managed Super Funds, the largest superannuation sector.

Overall the Cooper Review finds Self Managed Super Funds in pretty good health but some areas need adjusting.  Additionally the review noted that most people and organisations it has spoken to about SMSFs have reasonably uniform views on changes that will improve this very important part of Australia's retirement wealth assets.

The purpose of this initial report is to give interested parties a clear picture on the likely shape of final recommendations that the Cooper Review's brains trust will ultimately make to the Government.

Every aspect of Self Managed Super Funds has been examined.  In all the report contains 27 draft recommendations.

It's important not to get too carried away with these proposals made by Cooper because there is a long and winding road between initial thoughts and actual legislation.  This is especially the case in election years.

That said the broad thrust of the Cooper Review's thoughts seems to be quite settled so we have a reasonable future view of most future changes.

The Review reveals ten guiding principles for SMSFs that will shape the recommendations it ultimately delivers to the Government.  These guiding principles are important because they give us a good basis to assess the future regulatory environment for Self Managed Super Funds.

One of the guiding principles says that some regulatory intervention is justified because the tax concessions given to super funds and if a SMSF fails, the members can fall back on the aged pension.  Another principle says that leverage within SMSFs is okay but should not be the predominant feature of a super fund

The issue of regulatory rules are justified because tax concessions are given to super investments is an interesting twist on past explanations.  Twenty years ago, the justification for super tax concessions was primarily to compensate investors for the long-term nature of superannuation and for agreeing not to have personal access to invested capital for many years.  Most Self Managed Super Fund investors pay, or have paid, significant amounts of tax.

There are nine broad regulatory areas that the Cooper Review think need tweaking.  We will examine several of them here:

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