SMSFs have done well for themselves. It is the general impression and true to a great extent. The Treasury has strong opinions about credit franking and feels that the SMSFs are tax-eluders, but it must be said that the same clause which allows SMSFs to enjoy tax rebates apply to the big Super funds, too.
The USA may like to say something about our Super knowhow
In fact, a lot of what’s being said about SMSFs is a kind of vitriolic attack launched by Super funds which have suffered in their hands. So where are the industry funds and other big pool funds erring? The USA may have an answer to this.
The fund managers live in a shell
At the risk of sounding condescending, the US superannuation funds can certainly say they can teach a thing or two to the Australian Super funds. Parametric, a US investment advice house based in Seattle, believes that managers to whom the investment management is being outsourced need to know what’s happening in the market and understand how their peers tied to the other Super funds are behaving. In Australia, this has not been the case so far, quite unlike US where each Super fund’s manager knows about the moves of other.
Unnecessary brokerage and ignorance about the Buy and Sell position
This ignorance makes fund managers vulnerable to those tax payments which can be easily avoided. Also, the fund managers pay a lot of unnecessary brokerage simply because they do not know how their ‘buy’ or ‘sell’ position can be used to their advantage because another fund, at the same moment, may be in the reverse position. For instance, fund A looking to buy can cross orders with another fund, say B, looking to sell. The transaction in question can be easily achieved without brokerage. The cumulative brokerage amount adds up to a substantial figure if you think of it.
Australian Supers holding stock for more than a year are charged 10% whereas those holding for less than a year are charged 15%. If managers were more aware of such things, they could use the tax implications to their benefit.
Here’s a trivia for you: We are among the very few countries that tax funds in their accumulation phase and it is not a very kind statement on our Super regulations.
