Financial Standard Comments - SMSFs may be banned from buying shares off-market

Comment by John Hewison ()

John Hewison () — Fri, 08 Jul 2011 15:07:44 +1000

What a joke this is. If the suggested abuse through the use of off-market transfers are such a problem, then it applies to all such transactions not just SMSFs. So if the practice is to be banned it should be banned totally, otherwise SMSF operators are being subjected to unfair discrimination. The reality is that the incidence of the suggested abuses is no doubt a minute percentage of these transactions and their ban would result in unfairly increased brokerage ccosts to SMSFs and the removal of a perfectly legitimate and commmercial advantages available to all through the strategic transfer of assets. We should be in the business of encouraging the retention of assets and enhancing outcomes.

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Comment by Michael Hutton ()

Michael Hutton () — Fri, 08 Jul 2011 15:35:26 +1000

John Hewison makes great sense. Agree completely.

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Comment by David ()

David () — Fri, 08 Jul 2011 15:37:47 +1000

This just shows how disconnected the government is from the reality of the financial system. Obviously their experience only with the very generous Defined Benefit Schemes they have the luxury of enjoying for themselves, also gives rise to an intrinsic ignorance regarding all other mechanisms; including Self Managed Super.
Yet another example of this government over-manufacturing legislation which hurts the investor's bottom line.

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Comment by SMSF Auditor ()

SMSF Auditor () — Fri, 08 Jul 2011 16:01:00 +1000

I wish that John Hewison were correct in stating that the "suggested abuses is no doubt a minute percentage of these transactions". Unfortunately, that is not my experience.
In my SMSF audit practice I have found numerous instances of suspected backdating of off-market transfers. This is not a matter for which we auditors can lodge auditor contravention reports because the hard evidence is not there; however that does not mean that the mischief is not occurring. As regards the brokerage, I think most people would agree that brokerage is a relatively minor expense these days.
I am not sure what SPAA is referring to when saying that SMSFs will be placed at a disadvantage when compared to other funds. After all, members of retail and industry funds have no capacity to make "in specie" contributions to those funds. Surely this proposal will put members on an equal footing.
The concessional tax treatment of superannuation is significant; the resulting tax savings are considerable. Let's not give our cash-strapped government a reason to withdraw some of these great benefits.
I see this proposal as a minor change which will improve the integrity of the system. I think it deserves broad support.

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Comment by Seamus O Concheanainn ()

Seamus O Concheanainn () — Fri, 08 Jul 2011 23:11:07 +1000

The biggest concern raised by this story is how it highlights the systemic lack of understanding by regulators and their advisors of how the markets work and how law is practically applied. Instead, we constantly see reactionary overprescription instead of a rigorous application of the existing (and adequate) law. On the Calder Highway north of Melbourne, the Victorian Government decided to manage speeding in a 100kmh zone by reducing the speed limit to 80kmh. Instead of penalising the few lawbreakers, the screws are instead turned on the whole population - even though the vast majority are compliant. The parallels here are compelling. Fundamentally, it points to an intellectually lazy approach to regulation. We are entitled to better outcomes from our tax dollars.

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