Treasury announce new draft regulations
Treasury recently released the latest round of draft regulations which give effect to more of the Stronger Super reforms.
Specifically, the exposure draft provides detail around amendments to the Superannuation Industry (Supervision) Regulations 1994 to require the following:
Investment Strategies – must consider Insurance and need to be reviewed regularly
Trustees of SMSFs will need to consider insurance for their members as part of the fund’s investment strategy. The Government will accomplished by inserting a new paragraph after 4.09(2)(d) that trustees are required to consider whether the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund. The key here is that this would now be considered as part of the fund’s investment strategy, which is certainly different to the way most trustees would be currently doing it (if at all).
The other interesting addition is the proposed change to Reg 4.09(2) which deals with the trustee needing to formulate and give effect to an investment strategy for the fund.
It is proposed that it will be altered to now also include the requirement to “review regularly” the investment strategy. Of course, we don’t know exactly what “regularly” means, but we suspect it will dovetail with the annual administration/ audit requirements. In other words, at least annually.
SMSF money to be kept separate
Money and other assets of an SMSF must be kept separate from money and assets held by a trustee personally and by a standard employer-sponsor or an associate of a standard employer sponsor. In making this requirement an operating standard, the Australian Taxation Office (ATO) will now have a direct power to enforce this requirement. A new paragraph 4.09A will be inserted after 4.09 to give effect to this change.
Valuation of Assets
SMSFs will be required to value the assets of the fund at “net market value” for reporting purposes. This will mean that when preparing accounts and statements required by subsection 35B(1) of the SIS Act an asset must be valued at its net market value. This will ensure that assets held within the superannuation system are valued in the same manner and will provide members with current and accurate information about the financial position of their SMSF and their entitlements. A new paragraph (Reg 8.02B) giving effect to this will be inserted after 8.02ANote that net market value will be defined as “the amount that could be expected to be received from the disposal of an asset, in an orderly market, after deducting the costs expected to be incurred in realising the proceeds of such a disposal.”
Remember, these are only in draft form at the moment. Whilst there may be some changes around the edges or some further explanations to take into account some of the various issues that may be raised, we don’t think any of these are highly controversial or will be changed substantially.
It is proposed that the proposed Regulations would commence on 1 July 2012. We’ll keep you posted.
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