Advisers, accountants and industry associations have reacted furiously to suggestions the self-managed super fund (SMSF) industry is not properly policed by regulators.
"The ATO [Australian Taxation Office] has a risk-based approach to supervising and reviewing funds, which we believe is quite successful. It targets the potentially bad ones," CPA Australia senior superannuation policy adviser Michael Davison said.
Davison also pointed out that the ATO was supported by auditors in their oversight of the sector.
"The auditors' role is to oversee the funds and report any contraventions and I think the auditors are doing their job. The ATO might not cover all of the funds, but all of the funds are covered," he said.
ATO commissioner of taxation Michael D'Ascenzo acknowledged at the annual SPAA conference held in February this year that auditors were an important part of the regulatory oversight of the sector.
"In many ways, approved auditors are our 'eyes and ears' for the SMSF market," he said.
"Competent professionals in this field also inspire community confidence that the considerable tax concessions provided to super are appropriately applied," he said.
The ATO received contravention reports on about 2 per cent of the funds last year, while half of these contraventions had already been rectified by the time they received the ATO.
"That translates to a 98 per cent compliance rate; I think any industry would be pretty pleased with that," Davison said.
Yesterday, Industry Funds Management chair Garry Weaven said that SMSF were largely un-policed, while the popularity of the funds was mainly driven by accountants looking to sell their services
Self-managed Super Fund Professionals' Association of Australia (SPAA) chief executive Andrea Slattery pointed out that the former chair of the Super System Review, Jeremy Cooper, has held up SMSFs as the super fund model of the future.
"Cooper announced at our conference that in 30 years' time if every member was looked after to the benefit of themselves and their personal circumstances that the SMSF was the best vehicle for that," she said.
She also said the performance of SMSFs spoke for themselves.
"SMSFs have been outperforming the industry funds and the retail sectors for the majority of the last 10 years and APRA has confirmed that that was by up to 6 per cent and SPAA research that even through the global financial crisis it was by more than 2 per cent," she said.
KR Securities SMSF advisor Nathan Baker said Weaven's comments showed a lack of understanding of the sector.
"These assertions just demonstrate a quite astounding level of ignorance," he said.
"SMSFs operate under the same rules as industry funds, they are audited every year and compliance breaches are addressed by trustees and the ATO," Baker added.
"SMSFs just offer a degree of flexibility that the industry funds can't. That's not their fault, they are a homogenized product run for many, while SMSFs are a tailored solution," he said.
"Industry funds should be worried about SMSF's," BGL Corporate Solutions managing director Ron Lesh said.
"As balances get larger, members look at fees versus returns and leave the industry funds as they can do it better themselves."
Association of Financial Advisors chief executive Richard Klipin argued that Weaven's comments were largely politically driven.
"Our concern with Weaven's comments is that once again it is the union movement that is driving government policy. That should be a concern to all Australians with money in super," he said.
Klipin pointed out that the industry had seen a series of reviews, and more government involvement would not be in the best interest of super fund members.
