There are only a few hundred Australian Prudential Regulation Authority (APRA)-regulated funds compared to almost half a million SMSFs, and it would not be possible for the Australian Taxation Office (ATO) to provide the same level of oversight to SMSFs as APRA does to the funds it oversees, the FSC stated.
Responding to questions on notice put by the Parliamentary Joint Committee on Corporations and Financial Services around the ‘expectation gap’ surrounding the licensing and establishing of SMSFs, the FSC said it is arguably not appropriate for the same level of oversight to be applied to self-managed versus third party-managed funds.
“Nevertheless, this may in itself give rise to an expectations gap if there is an assumption that the same level of oversight exists,” the FSC added.
“The FSC believes this is the central distinction that should be conveyed to individuals who seek to establish or are advised to establish an SMSF.”
The key differences between the sectors are in the levels of responsibility, risk and protection between self-managing your superannuation or relying on a third party APRA-regulated trustee to oversee your superannuation, the FSC added.
The group said the other most commonly cited regulatory gap in relation to SMSFs has traditionally been the accountants’ exemption, but noted this would be phased out under Future of Financial Advice (FOFA) reforms, which would also increase the conduct requirements across all Australian financial services licensees.
“Finally, a further strengthening of the regulatory framework in relation to SMSFs was the recent introduction of a requirement for SMSF auditors to register with the ASIC [Australian Securities and Investments Commission]. To be successfully registered, auditors are required to pass a competency exam, have certain educational qualifications and supervised experience,” the FSC noted.
“Notwithstanding the perceptions and/or expectations gaps, the FSC is of the view it is important to analyse the impact all of these reforms will have on the uptake of SMSFs and the types of individuals who decide to establish SMSFs, before determining that further regulatory change is required.”
