25 July 2018
The SMSF Association (SMSFA) welcomes the opportunity to make a submission to the Productivity Commission on its draft report on the efficiency and competitiveness of the superannuation system.
While the Commission’s draft report has focused mainly on the APRA-regulated fund issues, the draft report evaluated a number of SMSF issues and made draft findings which this submission responds to. Most notably, the draft report asserts that SMSFs will only have comparable returns to APRA-regulated superannuation funds and comparable costs where the SMSF Has at least $1 million in assets. The SMSF Association rejects this finding on the basis that the evidence supporting it is not reliable and we do not believe any final recommendations should be based upon it.
Key points of the submission are:
- A defined balance establishment limit is a blunt and inappropriate tool to regulate SMSFs.
- Data problems relating to investment return methodology, retirement demographics and different costs incurred by SMSFs and APRA-regulated funds make it unreasonable for the Commission to appropriately make a finding that SMSFs are not cost-effective with a balance below $1 million.
- Alternative data on SMSF investment returns and costs provide more accuracy than the ATO data which the Commission has relied on and shows that SMSFs are cost-effective below a $1 million balance.
- The SMSF cost-effectiveness debate must extend beyond an analysis of net returns to consider the different and varied motivations that SMSF members have in wanting to have their superannuation in an SMSF, such as control, and their individual retirement goals and income.
- Financial advisers that want to advise SMSF members should have undertaken specialist SMSF advice education in order to lift the quality of SMSF advice.