Self-managed super funds are closely monitored by the ATO to ensure regulations are being met across all areas. As SMSF are run by members, it is their responsibility to comply with all related super and tax laws. The independent nature of an SMSF creates an environment that people are confused by or can attempt to exploit.
One area of concern for the ATO regarding SMSFs is that these types of funds are being used to gain access to super before preservation age. Preservation age is dictated by the year in which you were born, super cannot legally be accessed before you reach this age. A growing number of investors in their 30s, far off from their preservation age, are moving their super into an SMSF in an attempt to gain access to their super early. The ATO has noticed an increase in this strategy in the last five years. If found to be doing this, penalties can include funds being wound up, a 45% tax impost being applied, administrative penalties which have a cost attached, or being disqualified from running a fund.
The ATO is also looking into possible problem areas in relation to SMSF contraventions. Loans to SMSF members, in-house assets, investing in related-party assets and failure to keep assets separated account for the bulk of the contravention reports. With that being said, the ATO lists administrative errors, sole purpose breaches, borrowings, operating standards and acquisitions of assets from related parties as categories also seen in contravention reports. To avoid these issues in relation to your funds, make sure your SMSF is accessible in regards to your assets and keep detailed records to help substantiate transactions.
Whether you are a newcomer to the workforce or have been working full time for 30 years, you must have come across the concept of superannuation. Chances are, you’ve already been steadily building your retirement funds in one of the 500 Australian superannuation funds but are still unfamiliar with how exactly your super is being managed and where your super fund is investing your money in.
With the beginning of a new decade and social issues on the rise, it is time to take a more conscious stance on what you are doing with your super and what causes you are supporting through the employment of your money through your super fund.
A recent investigation into Australian super funds by the Australian Centre for Corporate Responsibility (ACCR), released in February 2020, found that 50 of the largest super funds in Australia are proxy voting against local climate-change initiatives. These organisations are instead approaching climate change from a global perspective, whilst ignoring more pressing domestic challenges to reduce carbon emissions..
The lack of support from Australian super funds for localised climate action is growing problematic, as Australia fails to address its appalling record on carbon emissions and is falling behind new-age global goals to fight against environmental degradation and climate change.
In contrast, some of Australia’s most environmentally and socially conscious super funds lack the reputation to attract long-term users. To look for more environmentally friendly Australian super funds, the Responsible Investment Association Australasia (RIAA) grades supers based on their ethical contributions and makes this information available to the public.
Instead of mindlessly joining Australian super funds that are neglecting growingly problematic domestic climate change issues, Australians need to become more conscious of our indirect actions and super investments. Rather than investing in an unethical super fund, looking into self-managed super funds may be another good option. We need to learn to take matters into our own hands and become more socially conscious of where exactly our money goes.
