Presented by John Maroney, CEO, SMSF Association at the inaugural SMSF Expo at the Melbourne Convention & Exhibition Centre on Friday 27 April 2018.
Good afternoon and welcome to the inaugural SMSF Expo. I am John Maroney, CEO of the SMSF Association, and we are very pleased to have partnered with Exhibitions and Events Australia to launch this inaugural SMSF Expo.
I sincerely hope you find all the sessions to be informative and stimulating and that by the end of the day your decision to come to this event will be more than validated. Certainly, that is our intent, with the sessions deliberately chosen to maximise your interest and further your knowledge of all things SMSF.
For those who had the pleasure to hear Minister Kelly O’Dwyer speak this morning, it was very exciting to hear the Government’s plans to improve the regulatory framework for the SMSF sector to ensure that it is more sustainable in the future and to provide more flexibility for the operation of SMSFs. We have advocated for an increase in the maximum number of SMSF members for many years and strongly support the government‘s proposal to increase that limit to six members. We also strongly support the proposal to enable electronic transfers to and from SMSFs as this should speed rollovers and reduce administration and compliance costs. We await with interest more positive announcements from the government in next month‘s budget.
The staging of this inaugural Expo is an exciting, indeed, historic day, for the SMSF Association and the self-managed super fund sector of the superannuation industry. Our National Conferences are seen as the key event on the SMSF calendar, and we aspire to achieve the same prominence for trustee events.
When the Association announced in 2016 that it was launching a Trustee Knowledge Centre for SMSF trustees, our ambition included events such as this Expo to bring together SMSF specialists across all professions with you, the SMSF trustees and those considering establishing an SMSF.
We believe that having SMSF trustees and specialists interacting would be beneficial for all concerned, with events such as this Expo allowing you to hear first-hand the specialists’ considered views, while they can get a better understanding of the issues of most concern to you.
On reflection, launching the SMSF Trustee Knowledge Centre was timely. It was only a month later that the Treasurer, the Honourable Scott Morrison, brought down a Budget that had far-reaching ramifications for SMSFs. Many of the changes we disagreed with – and we said so. But we worked with the Government to effect change, and, partly because of our efforts, the final legislative package was significantly improved.
Today, we are working diligently with our members and with other organisations, to encourage the Labor Party to withdraw its proposal to disallow cash refunds for excess dividend imputation credits.
Although there are many reasons why this is bad policy, our core objection is that it unfairly targets the SMSF sector. Over a million Australians, such as yourselves, have based their retirement income strategies around this well-established principle of refundable franking credits, which, incidentally, Labor supported when it was introduced in 2000.
Having done so, these current self-funded retirees and those aspiring to become self-funded retirees are now being “punished” for doing exactly what the super system was designed to achieve – having more people self-reliant in retirement and less reliant on the Age Pension.
We will work strongly to oppose this poorly thought out proposal by the ALP over the period leading up to the next Federal election and beyond if necessary. One of our first steps will be to raise awareness about the impact of the proposal on all those affected and to explain why the policy is unfair. The term “franking credits” or “imputation credits” is not well understood by the broader community, so we will start using a clearer term to explain the issue. That term is “company paid tax credits” which is much clearer and self-explanatory … companies have paid tax on behalf of their shareholders and those shareholders receive a tax credit for that tax that has already been paid. It is very important that the issue can be explained clearly to all those affected, to their children who will also be adversely affected and to everyone in the community who supports the principle of fairness in the design of tax policy.
Once again, a proposal that is primarily revenue driven is undermining confidence in the superannuation system. Let’s take a moment to reflect on that thought – undermining confidence in the system.
The very last thing self-funded retirees need is for their confidence in superannuation to be diminished. Indeed, it should be quite the opposite – politicians should be taking every opportunity to instil confidence in the system.
Why do I say this? Simply because we are living in very volatile investment times, not just in Australia but globally. In my previous role at the Bank for International Settlements in Switzerland, I witnessed first-hand the measures that were taken to stave off a global depression and to kick start economies that were faltering in the wake of the Global Financial Crisis – and the subsequent policy impacts are still playing out.
One obvious consequence was for central banks to ease monetary policy, to such an extent in some countries that people were actually paying governments for the privilege of holding their debt, via negative interest rates.
Today, it means self-funded retirees in Australia are only earning about two per cent for their cash and term deposits, and despite talk of interest rates rising I suspect interest rates could remain low for several years.
This is one factor behind the design of today’s program, because many SMSF trustees seek at least a five per cent per annum return on their retirement portfolio to enjoy a comfortable retirement. Hopefully, today’s program will help you focus on how best to navigate volatile investment markets and historically low interest rates.
There is another aspect to this confidence theme. Although Australia’s compulsory superannuation scheme is more than a quarter of a century old, I would argue it’s still in the “construction phase”, especially regarding the draw down phase of retirement. There is no better example of this than the fact we still lack a legislated definition of the objective of superannuation – a recommendation that came out of the Murray Financial System Inquiry.
We all know that an ageing population with people now living, on average, well into their 80s makes superannuation a vital cog in the nation’s retirement income policy. Yet we still need to achieve the stability around superannuation that characterises other key social policy areas such as Medicare, in part, I suspect, because this 2.5 trillion-dollar nest egg is just so tempting for politicians looking for solutions to fiscal problems.
This is what we need to achieve to avoid the surprises that happened with the 2016 Budget, and, now, with Labor’s proposal to disallow cash refunds for “company paid tax credits”.
What we need is a way to separate superannuation from the annual Federal Budget cycle and, where possible, only effect major change with bipartisan support. The SMSF Association has been at the forefront in advocating this. Although there will always be political differences on the fringes, having agreement across the political spectrum on the system’s basic principles would be invaluable. We have achieved this with Medicare – why not superannuation?
This is why the current Productivity Commission inquiry, “Superannuation: Assessing Competitiveness and Efficiency”, whose final report is due soon, is so important. Inquiries such as this can provide the policy recommendations by which change can be implemented after solid research and public debate. It avoids the policy surprises that are typically fiscally motivated.
The other current inquiry, which, I suspect, has grabbed your attention at the breakfast table, is the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
I don’t want to go into detail about an inquiry that is proceeding, except to say this. We believe that the poor practices and behaviour in the financial advice industry unveiled in recent weeks are extremely disappointing and we strongly condemn such practices and behaviour.
Advocating higher standards of SMSF advice has been this Association’s mantra since its foundation in 2003, and our continuing professional development program, code of conduct and accreditation programs are testimony to our commitment.
Finally, our conduct and disciplinary procedures are designed to ensure that any complaints are handled effectively, expeditiously, and observe the principles of natural justice and procedural fairness.
Although much of the focus at this Expo has been on investment issues, that’s not the sole focus of the program, and we hope you gain valuable insights on issues such as downsizer contributions, super rule changes, and managing your super as part of a wider financial plan.
In addition, our exhibition features a wide array of companies who can offer insight into different options available to your SMSF and I encourage you to speak to them. Events such as these are never possible without sponsors and exhibitors and I would like to thank them for being a part of this event. In particular, I wish to thank our Diamond Sponsor, Lincoln Indicators, which provides stock market research, share portfolio management systems and managed funds solutions.
Before I introduce the next speaker, let me conclude by saying this. The SMSF Association is committed to support SMSF trustees, strongly believing in the benefits we can deliver to them. If you are not a member, I urge you to visit our stand and enquire about joining our Trustee Knowledge Centre, or, talk to us about how we’re building an “advocacy army” to ensure your voice is heard in Canberra to help protect your retirement savings.
You have worked hard to achieve self-sufficiency in retirement, playing by the rules many of which have been in place for many years, and as such are entitled to a policy framework that doesn’t unfairly undermine legitimate plans for those who are aiming to be self-funded retirees.
We will be strongly advocating on your behalf and I strongly encourage you to sign up as members of our Trustee Knowledge Centre, so that we can send messages to Canberra to protect your retirement plans most effectively.
Enjoy the Expo.