In response to the Productivity Commission’s (PC’s) inquiry into superannuation, SMSF software provider Class Limited said it has highlighted and filled in what it said are some critical “gaps” in the commission’s draft report.
Class said the commission’s 571-page Report into Superannuation provided some well-researched findings on Australian Prudential Regulation Authority (APRA) funds but failed to hit the mark on self-managed superannuation fund (SMSF) performance.
Class pointed out that this wasn’t a reflection on the quality of the commission’s work, but was a stark reminder of the inherent differences between how APRA and the Australian Taxation Office (ATO) report fund performance.
In its submission to the inquiry, Class said some key disparities in performance reporting included:
• The ATO includes contributions tax and insurance costs in net earnings – APRA does not;
• Given these extra costs, the ATO performance measure will always be worse than APRA’s;
• The smaller the SMSF balance, the higher the impact of those extra costs.
Class said it completed its own analysis based on publicly available contribution tax and insurance data from the ATO, to restate SMSF performance so it could be directly compared to APRA fund returns.
For the 10-year period the commission’s report covers, SMSFs outperformed APRA funds on a like-for-like basis, the firm said.
“It appears that the advice the commission got from the regulators was that it is ‘too hard’ to compare the performance of APRA funds against SMSFs – which is disappointing, given the dual regulators are responsible for an industry worth over $2 trillion,” Class chief executive Kevin Bungard said.
“The Class analysis highlights how significant the different approaches to performance reporting really are.
“It’s time that the two industry regulators start to actively collaborate to deliver accurate insights into like-for-like fund performance. This is part of Recommendation 22 that was included in the report, and one that Class wholeheartedly agrees with.”
