Reforming SMSFs to Curb Illegal Access: A Call for Oversight

Recent ATO reports reveal alarming levels of illegal access to SMSF funds. CA ANZ's Tony Negline advocates for crucial reforms, proposing legislative changes to allow unlicensed accountants to provide guidance and urging ASIC to offer regulatory guidance. Collaborative efforts are needed to address this pressing issue and protect SMSF investors.

Reforming SMSFs to Curb Illegal Access: A Call for Oversight

In recent revelations by the Australian Taxation Office (ATO), the illegal access of funds from self-managed super funds (SMSFs) has become a pressing concern. Tony Negline, CA ANZ's superannuation and financial services leader, suggests that crucial reforms could mitigate this issue and better protect investors.

Understanding the Problem: The ATO reported staggering figures, indicating $380 million and $255 million were illegally accessed from SMSFs in 2020 and 2021, respectively. This calls for urgent attention to address the root causes contributing to these unauthorized fund withdrawals.

Barriers Faced by Registered Tax Agents: Negline points out a significant issue exacerbating the problem. Registered tax agents without an Australian Financial Services License (AFSL) face restrictions when assisting clients in setting up SMSFs. The fear of running afoul of the Corporations Act and potential penalties often leads these agents to refrain from providing crucial assistance to vulnerable clients.

“We know from ATO data that many SMSFs are set up with the assistance of a Registered Tax Agent (RTA). Many of those RTAs do not have an Australian Financial Services License and will often conclude that they cannot assist vulnerable clients because they do not want to fall foul of the Corporations Act and face penalties,” explained Mr Negline.

Proposed Solutions: CA ANZ's preferred solution involves legislative amendments to allow unlicensed accountants to provide simple advice to clients about the risks and dangers of setting up an SMSF. This aligns with the accounting code of ethics (APES 110) and empowers unlicensed professionals to guide clients in making informed decisions.

However, until legal changes occur, Negline urges regulatory guidance from the Australian Securities and Investments Commission (ASIC) to unlicensed tax agents. This guidance would clarify the boundaries within which these agents can operate without unintentionally breaching the Corporations Act.

Collaborative Efforts for Lasting Solutions: Negline stresses the need for collaboration among regulatory bodies, including ASIC, the Tax Practitioners Board (TPB), professional associations, and the wider sector. This collective effort is crucial to finding lasting solutions that protect investors and maintain the integrity of SMSFs.

Preventing Unauthorized Access: Negline emphasizes the importance of intensified efforts by the ATO to prevent illegal early releases. He calls for increased resources in this already successful initiative to curb unscrupulous operators and fraudsters from preying on unsuspecting individuals.