The Federal Government has been accused of seeking to use legislative changes to self-managed superannuation funds (SMSF) structures to promote nothing more than easier estate planning structures for the wealthy.
The Australian Council of Trade Unions (ACTU) has said the legislation, currently being reviewed by the Senate Economics Legislation Committee, “will exacerbate the misuse of superannuation as a vehicle for tax avoidance and intergenerational wealth transfer”.
The ACTU said the changes would also give rise to more examples of “poor financial advice”.
“The Bill reflects the priorities of the Morrison Government to continually advantage the wealthy while undermining compulsory superannuation for workers,” the ACTU said in a submission. “This change does nothing to improve the retirement savings of workers but instead promotes its use as an estate planning tool.”
“The Bill proports there is a need for an increased number of allowable members due to larger families incurring additional costs in setting up two SMSF’s or alternatively invest in a large superannuation fund. According to the Australian Taxation Office (ATO), 70% of SMSF’s have two members and 23% have a single member. Only 4% of SMSF’s have three or four members, just 24,000 of the 600,000,” it said.
“The Bill highlights the priorities of the Abbott-Turnbull-Morrison Governments for superannuation to make it work better for the wealthy.
“This Bill further encourages the use of SMSFs without proper enquiry into their deficiencies which were highlighted in the Productivity Commission’s final report into Superannuation: Assessing Efficiency and Competitiveness. This Commission raised questions about the value being provided to customers by SMSFs and that those ‘with less than $500,000 in assets perform significantly worse on average’,” the ACTU submission said.
“This is due to the higher average cost as a proportion of its asset base and the costs incurred by banks and SMSF providers. The long-term impact for many is lower returns and worse retirement outcomes.
“Any expansion of the SMSF operating powers could provide further opportunity for poor financial advice and more profits for banks and for-profit superannuation fund providers. The Hayne Royal Commission showed reprehensible conduct from for-profit providers including conflicted remuneration, exorbitant fees, poor performance, fees for no service and charging fees to the dead. Countless retirees and workers are now facing a worse retirement due to the profit seeking and the self-interest of for-profit funds.
“The expansion of SMSF operating rules also assume a sufficient level of financial literacy within the general community, given that SMSF rules place accountability on an individual for the decisions they make as trustee.
“This change makes SMSFs even riskier and this is compounded by the Productivity Commission’s concerns. SMSF’s create greater uncertainty for the retirement outcomes of workers and undermine their ability to maintain their standard of living in retirement.”
