Productivity Commission doesn’t call for additional SMSF reporting

Productivity Commission, efficiency and competitiveness in the superannuation system, How to Assess the Competitiveness and Efficiency of the Superannuation SystemThe Productivity Commission has not called for additional reporting requirements to be imposed on SMSFs as part of its review of the superannuation sector.

The Government tasked the Productivity Commission with conducting an inquiry into the efficiency and competitiveness of the superannuation system.

The Commission has now released the draft report: How to Assess the Competitiveness and Efficiency of the Superannuation System. The report says: “At this stage, the Commission does not propose any additional collection of information on the SMSF sector to apply the criteria and indicators proposed in this study.”

“While data on the SMSF sector are not perfect, there appear to be no material data gaps.”

However the Commission does raise issues that must be overcome with regards to SMSFs.

“The evidence base on the SMSF sector has improved. The Australian Taxation Office collects and reports information, and various surveys have been conducted. However, the scope and granularity of published data is less than that reported for APRA-regulated funds. This raises potential issues for the application of some indicators to the SMSF sector.”

A particular issue is data comparability.

“Even where ATO data are available and appear comparable to APRA data, use of different underlying metrics and methodologies means comparisons would need to be made with caution.”

“The ATO notes while the methodology it uses to estimate operating expenses is as close as possible to APRA’s method, the data collected are not the same.”

“This raises the issue of the appropriate basis for comparing costs (and fees) in the SMSF and APRA-regulated sectors. The simplest approach would be to use reported SMSF operating expenses. However, this would only be a partial measure of true SMSFs costs given it would not capture the extent to which (some) members expend time and effort in operating their SMSF. This issue is not easily resolved.”

“Ideally, the indicators developed in this study… would be applied consistently across all the elements of the superannuation system, including the SMSF sector. In some instances, comparisons between the SMSF and APRA-regulated sectors may be useful for assessing system-wide efficiency and competitiveness.”

“Notwithstanding several data comparability issues and challenges discussed…, the Commission considers they are not significant enough to warrant excluding use of SMSF data as part of a review of the competitiveness and efficiency of the superannuation system. That said, it will be important to be aware of these issues and to take them into account in stage 3 [applying the criteria developed to the superannuation system ] and for the interpretation of results. Nevertheless, in some areas incorporating the SMSF sector may not be possible due to a lack of data.”

Submissions in response to the draft report are due by the 9th of September 2016.

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