(03) 9020 2905Sacre blue! That cheeky Cooper fellow wants to do what? He wants to ban DIY funds from owning artwork! No wonder the nation’s artisan peasants are openly revolting.
But it’s not just artwork. Cooper is apparently going to seek a ban on super funds owning collectibles, jewellery, antique cars, yachts, race horses and signed football memorabilia. And then he wants to take it, in my opinion, one step too far – he wants to ban them from owning wine.
My cellar’s full. There’s no more room! Where else is a man expected to store his excess quality wine, but inside his SMSF?
Jokes aside, while the relatively small percentage of existing SMSF trustees who own exotic assets will no doubt be upset – and it’s been fairly quietly upset so far – every single current and future SMSF trustee should be preparing to rise up and have a whine over this issue.
Exotic assets in your SMSF might not interest you. You might not believe that you will ever own some of the non-standard assets that Cooper has outlined that he’d like banned (and not just banned in the future, but anyone with them currently would have to sell them within 10 years).
But how much do you want a government to tell you what you can and can’t invest in through your SMSF? More importantly, where would it end?
I don’t own wine in my SMSF. I love my wines and I’ve got some lovely ones. And the sole purpose that I have bought them for – to drink every last drop with my wife and friends – would put me in serious danger of breaching the sole purpose test for superannuation (had my super fund purchased them).
In fact, I don’t own any “non-standard” assets in my SMSF. But I’ll defend every SMSF trustee’s right to own them.
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Concern has been highlighted in recent weeks by the nation’s artists. A few news outlets, including the ABC, have run stories quoting artists who believe that banning super funds from owning wine will hit them in the back pocket. Though small in number, Australia’s SMSFs are important owners and collectors of art. Shutting down ownership of artwork in the SMSF sector would cut an important source of artists’ income.
Given Australia’s artistic community, as a whole, seems to genuinely struggle for funds and relies on considerable handouts from government and private sources, where are they going to get the money to defend themselves?
They need to emulate the Mining Council’s attack on the Rudd Government’s Resources Super Profits Tax. But even if the arts community passed the hat around, it would seem unlikely that they’d be able to band together enough to fund much of a TV ad campain.
So, where do you sit? Most people didn’t start their SMSF to be dictated to about what they can, and can’t invest in.
People usually birth their SMSF because they’ve been upset with the performance of their previous super fund, they’re not happy with the fees on their fund, they don’t like the lack of choice available through commercial super funds or they would like the choice to invest on behalf of their future in a form that makes sense to them.
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Jeremy Cooper hands his Super System Review to the Federal Government a week today – on June 30. Given the five month lag in releasing Ken Henry’s Report, we shouldn’t expect Superannuation Minister Chris Bowen to be making his final comments as soon as he gets it (though it would be a pleasant surprise).
Importantly, the Cooper Review’s previously released reports and utterings suggest that SMSFs, as a system, ain’t broke, so it don’t need fixin’.
But that’s not going to stop Cooper, or Bowen, from tinkering anyway. Nothing is more sure. Sure, death and taxes are certain, but Australian-governments-fiddling-with-super happens is far more frequent.
The Rudd Government has declared its hand on superannuation. It believes people with $500,000 in super have enough, as evidenced by their Budget announcement on the new 50-50-500 rule (see my May 19 column). And what’s the average SMSF worth? Closer to $1 million (see my June 9 column).
Ergo, it would seem unlikely that the Rudd Government is going to have too much sympathy for Australia’s SMSF sector in any major reframing of policy here.
The most important part of the Cooper Review, as it relates to Eureka Report readers, is how much control should the government – any government – have over what SMSF trustees can invest in and how they can invest.
Why shouldn’t SMSFs be allowed to invest in non-standard assets? Cooper asked the question during his review process as to whether SMSFs should investment should be limited to the four major asset classes of cash, fixed interest, property and shares.
Should a government be able to set very thin paramaters around what super funds can invest in? It’s notable that in Cooper’s “Self-Managed Super Solutions” report of late April, the panel believed that DIY funds should have freedom of investment choices, but then wants to limit what DIY funds are actually allowed to invest in.
Cooper has outlined already that he’d like some focus to be taken off SMSF borrowing restrictions. On this, it would thankfully appear he’s wasting his time. The Government and the ATO have rule. And what they have done is entrench SMSF borrowing further into the law, rather than reduce its spread.
Let’s hope his musings on exotic assets similarly falls on deaf ears.
Bruce Brammall is director of Castellan Financial Consulting and author of Debt Man Walking.