I recently read an editorial in The Australian by Peter van Onselen entitled ‘Mexican standoff over super serves no one.’
It identified some of the more controversial issues in super at the moment, including the increase in the super guarantee rate to 12% from 9%, the low concessional contribution cap and the heavy tax penalties for exceeding the contributions caps.
Of interest were the author’s comments about superannuation in Australia in the context of the fiscal pressures that will be caused by our ageing population. As Mr van Onselen notes, if the government doesn’t fix super, ‘it is the equivalent of warning about an approaching tsunami without planning for its arrival.’ How right he is.
I would add to this that in formulating a plan for superannuation, we are only hurting ourselves when we make frequent changes to the system. Taking the tsunami analogy further, if people become confused about the latest plan of action when the tsunami hits – or they lose confidence in the latest plan – they simply adopt a ‘let’s worry about it when it arrives’ response. Clearly, this can’t be the approach for superannuation if the objective is a comfortable retirement for all Australians.
For super, the plan for the arrival of the retirement tsunami needs to be right – and the time to get it right is now. Superannuation has been subject to more than its fair share of tinkering by various governments over the years and this has eroded the confidence of Australians saving for their retirement through superannuation. More changes in recent years have resulted in many people being slugged with severe excess contributions tax penalties when they were simply trying to save for their retirement following the ‘new rules.’ Who wouldn’t lose confidence in the system?
So, as the government finalises its response to the Cooper Review into Australia’s superannuation system (we’re expecting a response before Christmas), one would hope that both sides of politics use this last opportunity to get it right. The message is simple: fix super in the best interests of Australians, and then leave it alone.
We have an obligation to overlook political short-termism for the benefit of Australia’s retirement savings in the future. After all, tomorrow’s budget balancing act will be acutely felt when the largest cost to government comes from supporting retirees via the aged pension and the health system. Indeed, the Mexican standoff over super serves no one.
Friday, November 26, 2010
Friday, November 5, 2010
More than an exemption
The last couple of months have seen many Chartered Accountants become increasingly engaged with the Institute as word spreads about the removal of the accountants’ exemption. It is an issue that certainly has many members “hot under the collar”. However I was surprised by the number of Chartered Accountants who weren’t fully aware of exactly what the accountants’ exemption is and the limitations it has in its application. (Yes, it still “is” – the removal is not due to take effect until 1 July, 2012.)
The accountants’ exemption refers to the ability for recognised accountants to recommend the setup or closure of a Self-Managed Superannuation Fund (SMSF) without the need to operate under an Australian Financial Services License (AFSL).
Interestingly, the only reason we need the accountants’ exemption is because SMSFs are considered or viewed as a financial product, which would otherwise require an adviser to operate under an AFSL.
My view is if SMSFs were more appropriately classified as a structure, not a product, the accountants’ exemption wouldn’t be required at all – it is the underlying investments that are financial products, not the SMSF itself.
The other difficulty with the legislation is that it doesn’t talk about an accountant advising a client NOT to set up an SMSF; nor does it allow accountants to explore alternatives for superannuation savings. In terms of structural, tax and asset protection advice, accountants need to be able to talk about SMSF as a viable alternative to other structures, such as companies and trusts, to potentially hold and grow assets.
Clearly, accountants need to talk about SMSFs with their clients but they also need to talk about a whole lot more! Accountants, as trusted professionals, are well placed to provide simple, affordable, non-product financial advice and have a significant role in ensuring Australians are able to gain access to advice when they need it.
This issue has had quite a bit of attention in the public domain – you may have seen an article I wrote in the recently released Spring 2010 edition of SMSF Magazine, entitled ‘Exempt No More’.
What kind of advice do you think accountants should be allowed to provide their clients? I would love to find out more about what our members think about this issue – please feel free to share your thoughts.
The accountants’ exemption refers to the ability for recognised accountants to recommend the setup or closure of a Self-Managed Superannuation Fund (SMSF) without the need to operate under an Australian Financial Services License (AFSL).
Interestingly, the only reason we need the accountants’ exemption is because SMSFs are considered or viewed as a financial product, which would otherwise require an adviser to operate under an AFSL.
My view is if SMSFs were more appropriately classified as a structure, not a product, the accountants’ exemption wouldn’t be required at all – it is the underlying investments that are financial products, not the SMSF itself.
The other difficulty with the legislation is that it doesn’t talk about an accountant advising a client NOT to set up an SMSF; nor does it allow accountants to explore alternatives for superannuation savings. In terms of structural, tax and asset protection advice, accountants need to be able to talk about SMSF as a viable alternative to other structures, such as companies and trusts, to potentially hold and grow assets.
Clearly, accountants need to talk about SMSFs with their clients but they also need to talk about a whole lot more! Accountants, as trusted professionals, are well placed to provide simple, affordable, non-product financial advice and have a significant role in ensuring Australians are able to gain access to advice when they need it.
This issue has had quite a bit of attention in the public domain – you may have seen an article I wrote in the recently released Spring 2010 edition of SMSF Magazine, entitled ‘Exempt No More’.
What kind of advice do you think accountants should be allowed to provide their clients? I would love to find out more about what our members think about this issue – please feel free to share your thoughts.
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