Wednesday, 20 August 2008 
 
 
The Institute of Chartered Accountants in Australia (the Institute) has released a discussion paper entitled Self Managed Superannuation Funds (SMSFs) – Review of the existing regulatory and governance framework. 
 
The discussion paper was released prior to an industry forum hosted by the Institute. The forum, designed to encourage open discussion and debate on the governance and structure of the SMSF sector, brought together stakeholders including, industry associations, members, government and practitioners. 
 
“The forum discussed in detail the issues that are currently influencing the SMSFs sector. It then discussed the ways that industry should, jointly with the government and regulators, be addressing these issues which include, SMSF structure, SMSF minimum balances, trustee education, the penalty regime, SMSF borrowing and the ATO as regulator,” said Hugh Elvy, Head of Financial Planning and Superannuation, Institute of Chartered Accountants in Australia.  
 
SMSF investment strategies represented a critical issue discussed at the forum that generated a high level of debate, with overwhelming delegate opinion being that the appropriateness of some SMSF investment strategies are highly debateable. 
 
“The Institute feels very strongly about how current SMSF investment strategies do not detail all the requirements of the Superannuation Investment Supervision 1993 Act (the Act). As one delegate stated during the forum - you don’t even need the strategy to be in writing. This is an area that requires immediate attention by all stakeholders.” Mr Elvy said.  
 
Current requirements under the Superannuation Investment Supervision Act 1993 (the Act), demand that each trustee formulates and gives effect to an investment strategy, this includes the risks involved with the funds investments, the composition of the funds as a whole, the liquidity of the funds investments and the ability of the fund to discharge its existing and prospective liabilities.  
 
“The Institute believes that as a starting point and as a minimum, fund trustees should document both a clear investment objective and a detailed investment strategy that is implemented appropriately and is monitored on an ongoing basis to ensure it meets the stated investment objectives. Very broad investment strategies and a lack of documentation explaining trustee’s reasons for a particular strategy make assessing the strategy with the requirements highly subjective. This creates real problems for the auditor as the auditor must sign the audit report stating that the fund has adopted its investment strategy.”  
 
“Robust investment strategies form the backbone of the SMSF sector and trustees’ retirement savings, the importance and appropriateness of investment strategies have come under scrutiny following the recent volatility in the Australian sharemarket. It is in times like these that it is imperative to have a robust and diverse investment strategy.” Mr Elvy said. 
 
Following the discussion paper the Institute produced a white paper detailing the issues and opinions raised at the industry forum. The white paper Governance of SMSFs and the discussion paper SMSFs – Review of the existing regulatory and governance framework are available to view and download on the Institute’s website.