The Self-Managed Super Fund (SMSF) Professionals’ Association of Australia (SPAA) has welcomed an Australian Taxation Office (ATO) statement outlining the courses of action available to people who manage their own super and are victims of fraud and theft.
The ATO last week released a statement, entitled “Legal protection for SMSFs”, confirming trustees of these funds had no access to government or industry compensation in the event of loss occurring from theft or fraud.
However, the regulator detailed the other methods of recourse SMSF trustees had in those circumstances.
“SMSF trustees do have certain rights and options available to them if their fund suffers a financial loss due to fraudulent conduct or theft. For example, SMSF trustees can choose to take legal recovery action against a person or persons who engaged in the fraudulent conduct or theft,” it said in the statement.
“Under Corporations Law, if the trustees received advice or services from an Australian financial services licensee who was involved in the fraudulent conduct or theft, legal options are available. SMSF trustees may also approach the Financial Ombudsman Service (FOS) if the trustee’s adviser, or other service provider involved in the fraudulent conduct, is a member of FOS.
“However, access to these legal options gives no guarantee that the fund will be compensated for fraudulent conduct or theft. Depending on the circumstances, the fund may receive no compensation or limited compensation.”
In SPAA’s opinion, this ATO information should effectively put an end to the ill-conceived notion SMSF trustees have no method of recourse from loss resulting from theft or fraud.
“It is correct that SMSF trustees have fewer avenues for legal action against fraud and theft compared with trustees of the APRA (Australian Prudential Regulation Authority)-regulated superannuation funds; but it’s wrong to say they have no available options,” SPAA chief executive Andrea Slattery said.
“The problem is most of the discussion about SMSF compensation only focuses on the option of government compensation and makes no mention of the broader legal options that are available to SMSFs.”
Slattery also took the opportunity to refute recent ASIC claims that SMSFs were being oversold as more people with superannuation balances of under $100,000 were setting up these structures.
She said this claim was not supported by the most recent ATO sector statistics that showed the percentage of SMSFs with balances under $50,000 had fallen from 11 per cent in 2006 to 6.8 per cent in 2010.
