COMPLIANCE
Required competencies SMSF practitioners are required to adhere to five competency standards. Grant Abbott details what this compulsory obligation involves.
GRANT ABBOTT is non-legal senior consultant at Abbott & Mourly.
To provide advice on SMSFs, there are five competency standards laid out in the financial services training package that can be found at www.training.gov.au, a joint initiative of the commonwealth and state governments. These are base competency standards and apply to all SMSF professionals. There is no moving away from these standards and they exist to support the industry and provide confidence and respect from clients and other financial services professionals that an SMSF professional is of the highest standard. But I continue to be surprised at issues and errors that come across my desk at Abbott & Mourly. We are not talking about administration mistakes, but failure to understand the law, regulations and even know the fundamentals of the trust deed. The fund’s trust deed is actually part of the superannuation laws and not knowing it means potential litigation. There are no ifs or buts: all SMSF professionals need to know these to a level of being “consciously competent”. If you don’t, you can be sued for any losses or damages the fund experiences. Cam & Bear Pty Ltd v McGoldrick [2018] NSWCA 110 is a good example where an auditor was sued for losses on an underlying investment in an SMSF. Unless you can show conscious competence under cross-examination, then it is time to rethink your commitment to SMSFs.
Warning to SMSF professionals If you have been following my articles in selfmanagedsuper, you will know: a. The commissioner of taxation states that a trustee of an SMSF must produce an investment strategy and regularly review it. b. The Australian Securities and Investments Commission (ASIC) has stated in ASIC INFO
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216 that accountants can prepare and advise the trustee on an investment strategy. They are exempt from the licensing rules in the Corporations Act 2001 when it comes to investment strategies, but importantly cannot advise a trustee on specific investments. The commissioner of taxation has published the following for SMSF trustees: “Broad investment ranges between 0 to 100 per cent in a broad range of assets do not reflect proper consideration in satisfying the investment strategy requirements. Your strategy must articulate how you plan to invest your super in order to meet your retirement goals.” SMSF administrators and accountants who have prepared an investment strategy for their client with 0 to 100 per cent broad ranges for classes of assets have breached section 52B(2)(f) of the Superannuation Industry (Supervision) (SIS) Act 1993. This is considered a personal breach as was demonstrated in Australian Prudential Regulation Authority v Holloway [2000] FCA 579 where the regulator at the time took action against the accountant personally rather than his corporate entity. Now here is the warning. If there is no investment strategy for the fund, the trustee can recover against the administrator, accountant and the auditor of the fund for any losses on investments pursuant to section 218 of the SIS Act. With the current equity market outlook moving to the downside, expect some actions by trustees against administrators. And don’t expect to use the defence of contributory negligence as this is a statutory claim under the SIS Act backed by the Commonwealth Crimes Act.
SMSF advice standards So how you can show your competence? As I noted above, there are five detailed competency standards – which you may or may not have read. Read these carefully and assess objectively how many of these you display in your SMSF
