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Government targets fund expenditure, best interests in new super reforms

 

Recently released draft exposure legislation will require trustees of super funds, including SMSFs, to exercise their powers in the best financial interests of beneficiaries and require APRA-regulated funds to support their expenditures with evidence.

 

         

Last Thursday, Treasury released exposure draft legislation and explanatory materials for its Your Future, Your Super package for consultation, which provides further details on the measures it announced in the federal budget.

The explanatory materials state that the proposed legislation will amend the SIS Act to require each trustee of a registrable superannuation entity and each trustee of an SMSF to perform the trustee’s duties and exercise the trustee’s powers in the best financial interests of the beneficiaries.

While under the existing covenant, SMSF trustees are already required to perform their duties and exercise their powers in the best interests of the beneificiaries, the proposed amendments further clarity the existing best interests duty by referring specifically to best financial interests, the explanatory materials (EM) explains.

“Similar to the trustees of other APRA-regulated superannuation entities, SMSF trustees will be required to ensure that they are acting in the best financial interests of their beneficiaries,” the EM noted.

“As the obligations are part of the section 52B covenants, there is no penalty if a trustee of an SMSF contravenes the best financial interests duty. However, SMSF trustees found not acting in the best financial interests of the beneficiaries could be penalised under other regulatory provisions in the SIS Act such as section 62 for breaching the sole purpose test or section 65 for providing financial assistance to relatives or members.”

The EM also warns that SMSF trustees in breach of the covenants may also be considered not to be fit and proper to manage their SMSF and could be disqualified under section 126A of the SIS Act.

As with the existing best interests duty, the EM explains that the new best financial interests duty will continue to apply to an exercise of a trustee’s powers in making payments to third parties by, or on behalf of, the entity or fund.

“The amendments specifically clarify this as third-party payments tend to be particularly subject to abuse. These actions by a trustee must be in the best financial interests of beneficiaries,” it stated.

“The trustee should be able to produce evidence supporting its decision, and have oversight that monies paid are being used by third parties for the intended purpose.”

In order to meet this duty, the draft legislation states that trustees should conduct reasonable due diligence when assessing payments to a third party.

“If, after having conducted this reasonable due diligence, the trustee knows or ought reasonably to know that the payment to the third party is not in the best financial interests of beneficiaries, or there is a concern that they might not be, the trustee should not make the payment,” it noted.

“The use of an interposed corporate entity that a superannuation fund owns equity in to acquire services on behalf of the superannuation fund will not insulate the trustee from ensuring that the services that are ultimately provided to the fund are in the best financial interests of their beneficiaries.”

“Trustees cannot hide behind unjustifiable claims that they are ignorant of what they are purchasing. Trustees should reasonably know what they are purchasing, and such purchases should be in the best financial interests of beneficiaries.”

For trustees and directors of APRA-regulated funds, the draft legislation said the evidential burden of proof for the best financial interests duty will be reversed so that the onus is on the trustee and each director to adduce evidence to support the contention that the trustee or director performed their duties and exercised their powers in the best financial interests of the beneficiaries.

“The reversal of evidential burden is reasonable as a trustee should be readily able to point to evidence that they considered the likely financial impact on beneficiaries of a decision to make a payment to a third party and how such payment was in the best financial interests of beneficiaries,” it argued.

“For example, the trustee could adduce records showing the due diligence undertaken in respect of the payment and the relevant third party and other factors demonstrating that the payment was in the best financial interests of beneficiaries. Whereas it is difficult for the regulator to prove that the trustee failed to take certain matters into account in determining whether a decision or payment was in the best financial interests of beneficiaries.”

“Reversing the evidential burden will mean that if the trustee or director of a corporate trustee is able to adduce evidence or point to circumstances consistent with the proper discharge of its duties, the evidential burden is discharged and the regulator will then be required to prove on the balance of probabilities that the trustee or director of a corporate trustee did not perform their duties and exercise their powers in the best financial interests of the beneficiaries.”

The EM clarified that the evidential burden of proof is not reversed for trustees of SMSFs as there is no penalty for a contravention of the best financial interests duty.

“However, SMSF trustees found not acting in the best financial interests of the beneficiaries could be penalised under other regulatory provisions in the SIS Act,” it stated.

In addition to the draft legislation covering the amendments to best interests duty, the government also released exposure draft legislation for its single default account and underperformance measures, which were also announced in the budget.

The draft reforms for underperformance will require APRA to conduct an annual performance test for MySuper products and other products specified in regulations. Trustees will be required to give notice to members when a product fails the test. Where a product has failed the performance test in two consecutive years, the trustee is prohibited from accepting new beneficiaries into that product.

SMSFs and funds with fewer than five members have been excluded from the annual performance test under the draft legislation.

 

 

Miranda Brownlee
27 November 2020
smsfadviser.com

 

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Retirement Planning

Retiring on your own terms is not always easy to achieve, however it is evident that those who plan for retirement are more likely to do so. Results also show that obtaining professional help during the pre-retirement years further improves the probability of attaining your retirement objectives.

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Insurance can’t replace a loved one but it can help reduce the financial burden by providing the capital to ensure your family has choices.

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Superannuation

Superannuation is mandatory but taking an early and active interest in your retirement planning is critical to ensuring your benefits are maximised by the time you retire.  Many will have a superannuation scheme through employment but increasing numbers are starting their own Self-Managed Super Fund (SMSF).

For many, simply relying on employer contributions may not be enough to provide the lifestyle you desire at retirement. We can assist in building strategies to ensure your retirement goals are met and your required lifestyle is maintained throughout retirement.

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Self Managed Super Funds

Self-Managed Superannuation Funds (SMSFs) offer a good strategy option for many individuals, families and small business owners to build tax effective wealth and to protect assets over time. SMSFs are becoming popular for those who are ready to take control of their own super investments as they give you ultimate control and flexibility to manage your retirement benefits.

It must be noted though, that you will have increased responsibilities as a trustee of the fund. As a SMSF Trustee you need to keep up to date with all required regulations and keep up with the fast paced financial markets.

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Your estate is made up of everything you own. This includes your home, property, furniture, car, personal possessions, business, investments, superannuation and bank accounts.

Having an estate plan is extremely important.  Having a will is just the first step in your estate plan. It is critical to consider what outcomes you would like for your estate and to ensure a plan is in place to achieve those outcomes, both including and beyond the terms of your will.

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Please enjoy the links to these free tools supplied by MoneySmart – a great resource for general financial information. Please get in touch if you would like to discuss any questions that you may have as a result of using these calculators.

Tess Uncle

B.Sc, M.Com, CA, DipFP

Tess has over 15-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.

Over the last two-years, Tess has turned her attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.

Tess’s mission is to bring the ethics and integrity of her Chartered Accounting background to the area of wealth management.

As a woman in a male dominated field, Tess is active in promoting gender equality in the industry through various programs and mentoring opportunities.

Using her depth of knowledge and experience in tax and accounting Tess is able to demonstrate a level of competence that is unique in the Financial Planning sector.

  • 2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
  • 2004 – Graduated Masters of Commerce from the University of New South Wales
  • 2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2007 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2015 – Awarded a Diploma of Financial Planning
  • 2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial

Adam Roberts

B.Bus, B.Sc, CA, DipFP

Adam has over 13-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.

Over the last two-years, Adam has turned his attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.

Adam’s mission is to bring the ethics and integrity of his Chartered Accounting background to the area of wealth management.

Combining traditional accounting and financial services has been a welcome move for Adam, allowing him to operate and advise in the financial sector that has been a long time personal passion.

Using his depth of knowledge and experience in tax and accounting Adam is able to demonstrate a level of competence that is unique in the Financial Planning sector.

  • 2005 – Graduated Bachelor of Science from the University of Western Sydney
  • 2005 – Commenced employment with Wybenga & Partners and part-time accountancy studies
  • 2007 – Graduated Bachelor of Business from the University of Western Sydney
  • 2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2010 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2015 – Awarded a Diploma of Financial Planning
  • 2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial

Advisory Cadetships

What is an Advisory Cadetship?
An Advisory Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.

How does it work?
Generally, our cadets complete a relevant business or accounting degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.

The Firm provides 3-hours paid study leave per week to attend university. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.

We take the work life balance very seriously at Wybenga Financial and our cadets are encouraged to have a fulfilling life outside the office. A typical day will have you arriving at the office at around 8.30am with most days concluding at 5.30pm.

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Our cadets benefit from the following:

  • Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers
  • Work helps your studies – by working full-time our cadets are able to apply their practical knowledge in the university subjects
  • Camaraderie with other cadets – the Firm has a number of cadets at various stages of their career
  • Mentoring – cadets are paired with a senior staff member who oversees their progress and training both at work and with their studies
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  • Modern environment – including ‘socialising’ areas such as pool table and break out area
  • Training – ongoing support and technical training. We also provide internal and external training on a monthly basis
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What happens when I complete my degree?
The completion of your degree is the first step of what we hope to be a long and successful career with us. The next step is the commencement of a Diploma of Financial Planning followed by completing the requirements to become a Certified Financial Planner (CFP).

There are always progression opportunities for the right cadets and we are dedicated to the long term development of our staff.

Who should apply?
Current Year 12 students or first/second year University Students who:

  • want to commence their career in financial advisory;
  • are due to commence or are currently completing a part-time business or commerce degree at university with an advisory major;
  • want to gain valuable hands-on experience while completing their qualifications;
  • are looking for a friendly working environment;
  • are team players who display initiative;
  • have a commitment to self-development;
  • possess excellent personal presentation and communication skills; and
  • are motivated and mature minded.

How do I apply for an Advisory Cadetship?
To apply for a Cadetship position at Wybenga Financial send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.

Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).

What if I have more questions?
For further information about our Cadetship program, please send your enquiry to info@wybengagroup.com.au