In this guide
- Rollover prevention and protection
- Mandatory trustee education
- Separate SMSF bank accounts
- Initial SMSF investment strategies
- Greater transparency on professionals involved in the SMSF establishment process
- Changes to the SMSF supervisory levy and ATO information
- What happens next
- The bottom line
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The Australian Government has proposed reforms to strengthen protections in the self-managed super fund (SMSF) sector, aimed at reducing fraud, poor advice and avoidable losses in retirement savings.
These measures are part of a broader consumer protection package for the superannuation and financial services system, set out in a recent Treasury fact sheet.
A particular focus is the SMSF establishment process, with new procedural requirements aimed at preventing high-risk rollovers where poor advice or scams may be involved.
The key measures are summarised below.
Rollover prevention and protection
Under the proposed changes, the Australian Taxation Office (ATO) would be empowered to block rollovers into newly established SMSFs where it has concerns about fraud, financial abuse, misconduct, or potential consumer harm.
This change is designed to prevent savings from being shifted into vulnerable structures before suspicious conduct can be properly assessed.
In practice, this measure may require the ATO to use information from other agencies or regulatory sources before deciding whether a rollover should proceed.
This would sit alongside the ATO’s existing power to decline new SMSF registrations.
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Find out moreMandatory trustee education
The reforms introduce mandatory trustee education, which may include testing, prior to SMSF registration. This reflects existing concerns that new entrants to the SMSF sector may not fully understand their responsibilities and legal obligations, or the costs involved in running a fund.
In addition, the government has promised to support industry-led initiatives to lift trustee knowledge and professional standards across the SMSF sector.
Separate SMSF bank accounts
One of the more specific measures announced is the requirement for all SMSFs to maintain ‘uniquely identifiable bank accounts’.
This would assist regulators and SMSF administrators in detecting fraud by improving the traceability and flow of SMSF assets. It would also reduce the risk of misuse or confusion between personal and fund assets.
SMSF trustees are already required to keep their personal assets separate from any fund assets under the SIS Regulations.
Initial SMSF investment strategies
Under current regulations, SMSF trustees are required to formulate, review regularly and give effect to an investment strategy that addresses the needs of the fund members. Under current processes, this is often developed once the SMSF has already been established.
Under the proposed reform measures, SMSFs would be required to have a written investment strategy at the time of the fund’s establishment.
There will also be further industry consultation to identify how to improve the overall quality and usefulness of SMSF investment strategies.
Greater transparency on professionals involved in the SMSF establishment process
Understanding who is involved in the SMSF advice and establishment process has always been difficult, but this could be about to change.
Under the reform measures, newly established SMSFs would need to disclose to the ATO the details of advisers and other entities involved in the establishment process, helping enable more timely intervention and assisting in identifying fraudulent activity or systemic poor advice.
This would also mean SMSF financial statements need to clearly identify any fees or costs associated with ongoing advice, giving SMSF trustees, the ATO and other sector participants a more accurate picture of the costs linked to existing SMSF advice arrangements.
As a result of gathering this information, the ATO would be able to provide additional information to SMSF members with low balances. This would allow members to compare their SMSF investment returns with those achieved by members of APRA-regulated funds, giving them a clearer picture of returns after costs and risks are considered.
The Australian Securities and Investments Commission (ASIC) has also weighed in on the provision of SMSF establishment advice to prospective members, suggesting that advice recommendations should not only focus on the appeal of greater control over superannuation, but should also provide clear guidance about the additional responsibilities involved in running an SMSF, the ongoing costs and the alternatives available.
Changes to the SMSF supervisory levy and ATO information
These new measures would increase administration and oversight and therefore come at a cost for SMSF regulators. As part of the changes, the SMSF supervisory levy would increase to $295 p.a., compared with the current levy of $259 p.a.
In addition to this fee increase for all SMSFs, newly created funds would be required to pay their supervisory levy at the time of the fund’s establishment, rather than when they lodge their super fund annual return.
What happens next
It is expected that some level of industry consultation will be carried out before rollout and the formal legislative process, helping ensure the proposed measures are practical to apply and strengthen confidence in the SMSF sector without impeding or undermining it.
The bottom line
For existing SMSFs, the proposed reform measures are unlikely to create significant disruption for trustees and members.
The biggest impact would be seen at the establishment stage for new SMSFs, where trustee education and knowledge standards would need to increase and where standard establishment procedures would need to be strengthened.
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