Compliance challenges for self managed superannuation funds

1
Compliance challenges for self managed
superannuation funds
PROFESSIONAL
FINANCIAL PLANNERS ASSOCIATION
24 NOVEMBER 2006
SEGMENT
AUDIENCE
DATE
Presented byIan Read Assistant Deputy
Commissioner of Taxation Australian Taxation
Office
2
Introduction

• Superannuation
• Changes over the last decade
• Our initial approach
• A plan to simplify and streamline superannuation
• Compliance coverage of self managed funds will
  more than double
• Case selection and risk rating capability more
  advanced

3
Environmental scan

• Surge in self managed fund registrations
• Tax Office and ASIC joint press release
• Four key questions about self managed funds
• Registrations up by 20,300 to 320,000 during
  2005-06
• Members increased by 39,273 to 616,756 during
  2005-06
• 64.5 individual trustee
• 35.5 corporate trustee

4
SMSF registrations per month
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Number of SMSFs registered
Average mthly registrations from 1-Nov-99
Trend - number SMSFs registered per month
5
Environmental scan

• 320,000 funds averaging 340,000 each
• Self managed super funds main investment types
• 1. Listed shares
• 2. Cash (including term deposits

6
Comparison of SMSF investments 2004 vs 2006
Other assets
Loan assets
Managed investments
Life insurance policies
0
10K
20K
30K
40K
50K
60K
70K
80K
Asset value (m) 30 Sept 2006
Asset value (m) 30 June 2004
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Balance of funds
8
Members of funds
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Prudential supervision vs Regulatory role

• Our role
• Superannuation Industry (Supervision) Act 1993
  and associated regulations
• Australian Prudential Regulatory Authority (APRA)
  regulate independently managed funds under same
  Act
• A prudential and risk-based approach
• Shared concerns

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Compliance program for 2006-07

• Compliance priorities
• Approved auditors
• Consultation with industry is ongoing
• Unrectified auditor contravention reports
• Reporting and Lodgment
• Fund income tax and regulatory return
• Reminder letters for lodgment
• Specific compliance risks
• Residency
• Record keeping

11
Early access compliance results for 2005-06

• Increased active compliance focus
• Looked at 2300 funds and 6633 suspected
  individuals
• During 2005-06
• Reviewed 1200 illegal early access cases
• Completed 819
• For 639 cases, amended assessments and raised
  4.2 million

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Early access compliance results for 2005-06 cont

• Over last two years
• Identified 24 promoters and 9 associates of
  illegal early access schemes
• Removed 223 funds from the register of complying
  super funds
• Currently investigating 14 schemes involving 1715
  funds and 3903 participants
• 2006-07 work program

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Enhancing the risk assessment process

• Continuing to improve our risk assessment
  processes
• Change Program will enhance our tools and
  capabilities
• Operational analytics used
• Developing models
• Risk assessing auditor contravention reports

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A plan to simplify and streamline superannuation

• Changes
• Benefits and contributions
• Finding and transferring lost superannuation
• Self managed superannuation funds
• New trustees
• Reducing Compliance costs
• Approved auditors
• Improving overall compliance
• Lodgment compliance program

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Closing

• Financial planners play a key role
• Our role is to administer an effective
  superannuation system
• To help Australians achieve financial
  independence in retirement
• Design robust administrative systems
• To make it easy for people to comply
• We will be implementing announced changes in
  consultation with
• Superannuation industry
• Professional associations