Todd Wills

The use of a binding death benefit nomination (BDBN) may help prevent legal challenges relating to perceived conflicts of interest where a beneficiary, who also administers the estate, will claim benefits personally, according to a superannuation lawyer.

Sladen Legal principal Phil Broderick noted several court cases had made it clear that if a potential beneficiary is also an executor of an estate and makes a claim for death benefits, they are likely to be found in a position of conflict of interest and will have to disgorge any benefits paid.

As such, Broderick advised preparing a BDBN well in advance to mitigate these legal risks.

“One option is to do a BDBN now because the problem with all of these [conflict of interest cases] is that there’s trustee discretion. The problem with trustee discretion is that the beneficiaries have to make a claim and they’re making a claim in a position of conflict,” he told attendees of a presentation at The Tax Institute’s recent Super Intensive.

“Whereas if the trustee is obligated to pay the death benefits to a person who might be in conflict or not, it doesn’t matter because there’s nothing for them to actually make a claim on behalf of the estate because the BDBN says that they get the death benefits personally. [It’s] important that be put in place if it’s appropriate.”

While the use of a BDBN was often the simplest way to avoid conflict of interest issues, he also advised inserting a clause into the respective will that specifically recognises the ability of beneficiaries to make the claim.

He added this course of action is the safest approach because if the BDBN is revoked or proves to be defective, trustees may still be exposed to legal risks when it comes to claiming death benefits on the estate.

“As shown in Brine v Carter [2015], you can consent or assent to conflicts of interest. So if you’re making a will and you want your surviving spouse or any of your beneficiaries who are also going to be the executor of your estate [to receive benefits], authorise that conflict,” he noted.

“We’ve been putting those sort of clauses in our wills for years because of this issue. Don’t do it for everyone because you want to make sure that the particular executor can make a claim personally.

“Generally [the clause] is going to be in the will and the clause could say something along the lines of: ‘It’s my wish that my super benefits be paid to my spouse and I authorise my spouse to make a claim for those super benefits on her own behalf, or his own behalf, or on behalf of the estate, or both.’”

“And then I would put a clause underneath saying: ‘I authorise, if my spouse or children are executors, for them to make a claim personally on behalf of the estate and I authorise them to do that notwithstanding they’re in a position of conflict of interest.’”

JP Morgan Asset Management has launched a large-cap global equity exchange-traded fund (ETF) on the Australian Securities Exchange (ASX), increasing its active ETF offerings in the Australian market to 12.

The JPMorgan Global Select Equity Active ETF (ASX code: JGLO) is a risk-controlled research portfolio targeting 70 to 100 of the fund’s high-conviction global investment ideas, featuring significant holdings in companies such as Microsoft, Amazon, Nvidia and Apple.

JGLO mirrors the strategy of the existing JPMorgan Global Select Equity Strategy, which is a diversified global equity portfolio that aims for strong performance across various market conditions while using a style-agnostic approach.

JP Morgan Asset Management global portfolio manager Helge Skibeli pointed out the ETF is expected to attract investors interested in capital growth and can act as a central element in portfolios for those with a high-risk, high-return profile who want daily access to capital.

“What we are seeing is that regardless of the market environment, investors are continuing to demand an active strategy that seeks to capture attractive return opportunities without taking undue risk,” Skibeli said.

“JGLO provides an attractive solution designed to help investors realise their financial goals and round out their portfolios with conviction.”

The investment manager highlighted the new fund draws on the expertise of more than 80 research analysts studying over 2500 stocks globally, while carrying a management fee of 55 basis points.

“With inflation starting to cool and market expectations of a soft/no landing, it’s time for investors to put their cash to work and consider an alpha engine that maximises the capabilities of our global research terms, but at a cost of 55 basis points, considerably lower than industry average,” JP Morgan Australia and New Zealand head of wholesale Mark Carlile said.

The introduction of this fund comes after the debut of two fixed-income ETFs last year.

The pass rate for practitioners sitting the most recent financial adviser exam has improved slightly after the implementation of minor changes to improve its efficiency and delivery.

New figures released by the Australian Securities and Investments Commission (ASIC) show 298 candidates sat the most recent exam in March, of which 210, or 70 per cent, passed. In comparison, 219 candidates sat the November 2023 exam, of which 145, or 66 per cent, passed.

In the March exam, 77 per cent of the total number of candidates were sitting the assessment for the first time, compared to 70 per cent in November.

The twenty-fourth iteration of the test is the first since Treasury released the Corporations (Relevant Providers – Education and Training Standards) Amendment (2023 Measures No 1) Determination 2023 to change the delivery and the structure of the exam.

More specifically, the amendment removed written-answer questions so the exam is based only on 70 multiple choice questions and removed the requirement that only provisional relevant providers and existing advisers could sit it, allowing individuals undertaking study to complete the assessment requirement.

The changes were broadly supported by the financial services industry, with Financial Advice Association Australia suggesting the amendment would lead to a more objective test and support more professionals to enter the industry at a time when there is a significant shortage of advisers.

According to ASIC, 21,102 candidates have now sat the exam, with 19,527 (92 per cent) successfully passing the assessment requirement. The March exam was the first of the 2024 calendar year, with future sittings scheduled for 6 June, 8 August and 7 November.

A technical specialist has reminded SMSF trustees they will be subject to additional earnings tax if they happen to exceed their transfer balance cap when electing to take a pension income stream.

“When you get issued an excess notice from the excess transfer balance determination from the ATO, that will include [notional] earnings,” BT Financial Group advice strategy and technical specialist Tim Howard told attendees of a webinar he hosted recently.

“Your excess transfer balance is the sum of not just the excess amount, [but] also the earnings on that excess, which yet again is a different calculation to the excess concessional or excess non-concessional contributions.

“Those earnings will continue to accrue until the point in time that the excess is actually removed from superannuation. And you will pay tax on those earnings right up until the time that the amount is removed, so while the continuing accumulation of earnings doesn’t need to be removed from retirement phase, it will still contribute to the amount that you have a tax liability on.

“[If] we’ve gone over our personal transfer balance cap by $100,000 and we just go and debit $100,000 out of retirement phase, that won’t necessarily fix the problem because we also need to debit out the notional earnings.”

Howard added there was a specific course of action trustees would need to take as soon as practicable to ensure the accumulation of earnings would not result in an increased tax bill.

“The SMSF needs to report the credit event to the transfer balance account via transfer balance account reporting that needs to be done by the 28th day of the month following the end of the quarter in which the event occurred. Once that is reported, the ATO will identify that there is an excess transfer balance issue,” he noted.

“It is the excess amount plus the earnings that needs to be removed from retirement phase by rolling that back to accumulation phase or taking it out as a member benefit lump sum. Taking a pension payment will not solve this problem; [it’s] got to be a lump sum that is commuted out.

“So it is important that we take that commutation event as soon as possible once we know that the client is in excess [because] once you’ve got that determination, there’s 60 days for the member to commute the amount out of retirement phase.”

SMSF trustees who have made an excess concessional contribution should take swift action to withdraw it from the fund as retaining it may have significant taxation consequences, according to a technical expert.

BT Financial Group advice strategy and technical specialist Tim Howard noted this situation arises from the treatment the ATO applies to concessional contributions when they have breached the respective cap limit.

“An important distinction worth mentioning from a tax component point of view is that while your excess concessional contribution will no longer count towards your concessional contributions cap, if it isn’t released, it’s going to count towards the non-concessional cap at the ATO’s end,” Howard told attendees of a BT Financial Group technical webinar held today.

“Often advisers or clients will think: ‘I don’t really mind if it counts towards my non-concessional cap, we’re not making large non-concessional contributions [and] we’re not going to inadvertently breach our non-concessional cap as a result of bring forwards in addition to that excess.’

“[But] from a member benefit point of view, that excess contribution was assessed on the way in, forms part of the taxable component on the way in, and even though the ATO now considers it non-concessional at their end, there is no mechanism or ability if you look at the legislation for that component to be reclassified as a tax-free component.

“So that excess will always be taxable even though it is now counting towards the non-concessional cap.

“My view would be it’s always going to be better to withdraw that excess rather than leave it in there to count towards the non-concessional cap. Just withdraw it and make a non-concessional contribution if the client wants to make one.”

In the case a trustee wilfully neglects to take action on managing excess contributions, he warned the tax implications for a fund could be severe.

“There are situations where you still can end up in a position where your excess concessional contribution can be taxed at up to 94 per cent,” he said.

“To find yourself in that position, you have to make a conscious effort to firstly leave that excess in super, have it count towards your non-concessional caps base, have it go into an excess non-concessional [environment] and then again nominate to leave it in there at that point as well.”

Vanguard Australia has responded to growing industry demand by making its managed portfolio strategies accessible on the Hub24 and Netwealth investment platforms.

In addition to the Macquarie wrap platform, advisers can now access Vanguard’s managed accounts through Hub24’s Discover, Core and Choice investment menus, as well as through Netwealth’s Accelerator Core and Accelerator Pro offerings.

Vanguard Australia head of financial adviser services Rachel White said the decision was prompted by feedback from advisers seeking access to the diversified portfolio.

“We are excited to make this announcement as the addition of these investment platforms represents a significant expansion of Vanguard’s managed account offer via new distribution channels,” White said.

“Most importantly, it reflects the growing demand from advisers for gaining greater access to our diversified solutions, which until recently have only been available on the Macquarie wrap platform.

“Behind the increased adviser demand is a recognition that Vanguard’s leading-edge diversified managed account strategies make multi-asset portfolio construction simple and efficient, without compromising on sophistication or performance.

“With four risk profiles available, including conservative, balanced, growth and high growth, the Vanguard strategies offer low-cost, instant diversification with exposure to over 16,000 securities across a range of asset classes, all backed by Vanguard’s multi-asset investment expertise and proven strategic asset allocation approach.”

According to the investment manager, the strategies will replicate the approach used in Vanguard’s broader range of diversified funds, offering flexibility as either a stand-alone solution or the core of a portfolio, with the option to add supplementary investments as clients’ requirements evolve.

Managed accounts are gaining popularity among SMSF advisers as they provide a degree of flexibility and a way to diversify a client’s investment portfolio.

The ATO has cautioned SMSF trustees about the risks of investing in cryptocurrencies and digital assets after noting ongoing losses among funds holding these investments.

The regulator identified multiple areas where trustees were losing their cryptocurrency investments, including exposure to scams such as counterfeit exchanges and hacking attacks leading to fund theft.

These risks extend to the collapse of foreign trading platforms and the loss of passwords, alongside schemes where scammers pose as tax authorities to extract sensitive investor information under false pretences.

“We continue to see SMSF trustees reporting losses with crypto investments due to scams and other reasons,” the ATO stated.

“Many crypto assets are not considered to be financial products. This means the platform where you buy and sell crypto is usually not regulated so you may not be protected if the platform fails or is hacked and you could lose all of your crypto.

“Investing in crypto can be complex and risky so we recommend trustees seek financial advice before investing.”

The ATO directed trustees to the Moneysmart website and its SMSF investing in crypto assets webpages for additional guidance and advice on navigating the complexities of investing in digital assets.

Additionally, trustees should regularly monitor the Scamwatch service operated by the Australian Competition and Consumer Commission and consult the resources available on the Australian Securities and Investments Commission (ASIC) website.

The warning comes after an auditing specialist noted SMSF practitioners can be held liable in court for losses if cryptocurrency investments fail and they are prohibited under a fund’s investment strategy.

ASIC also recently brought legal proceedings against three blockchain mining companies for allegedly encouraging investors to convert their SMSF funds into cryptocurrencies.

The latest ATO SMSF quarterly statistical report covering the December quarter revealed cryptocurrencies and digital assets currently make up over $1.02 billion of the total $878.4 billion of assets held by SMSFs.

A significant portion (23 per cent) of those assets were held by SMSFs with $200,000 or less in the fund.

SMSF trustees are incorrectly claiming specific self-education expenses as fund deductions despite the ATO recently providing clarification on this area, according to a technical specialist.

“Subscriptions and other education courses are [still] sometimes incorrectly claimed as a deduction because while you can claim subscriptions for memberships to professional industry bodies, that’s where the buck stops,” ASF Audits head of education Shelley Banton told attendees of a webinar held by her firm today.

Banton said the key to determining whether a fund expense is deductible rests in the purpose of the education activity being undertaken and whether the expenses are incurred in gaining or producing a fund’s assessable income and if they are capital in nature.

She added the regulator had not changed its view substantially in the recent Taxation Ruling (TR) 2024/3 since an ATO private binding ruling (PBR) several years ago.

“If we look at the PBR released back in September 2020, we know that it still supports the ATO’s view that [certain] types of expenses are deductible,” she noted.

“What happened in this PBR is the trustees asked whether the fund could claim a deduction for reimbursement of the costs of a course and subscriptions in relation to share trading.

“And what the ATO said was the shared trading activities of the fund are subject to the capital gains tax provisions and so any expenditure on the course and the subscriptions used is in relation to generating those capital gains.

“So it’s capital in nature and it’s not deductible by the fund.”

She encouraged SMSF auditors to consult TR 2024/3 and the PBR together when conducting audits on funds claiming these expenses.

“Bear that PBR and tax ruling in mind when the fund’s looking to claim deductions in this area because some of the courses are expensive and the ATO may not allow the deduction, especially if the trustee obtains a personal benefit,” she said.

The ATO has made a minor change to the way it communicates with SMSF trustees in an effort to combat identity fraud and scams.

“Our short message service (SMS) alerts for changes made to an SMSF used to contain a hyperlink. This has recently been removed as part of an ATO-wide project involving the removing of hyperlinks from all our SMS. This will help protect you by making it easier to distinguish between a legitimate ATO SMS and a fake SMS. Our email alerts still contain some hyperlinks,” the ATO stated.

The regulator normally sends fund members an SMS alert when a new SMSF has been registered or when an existing fund’s financial account details, electronic service address, authorised contact details or members have changed.

To that end, it emphasised communication between fund members was key in verifying whether a message advising of a change in the fund was genuine.

“If you receive a SMS or email regarding a new SMSF registration, or any changes made to your existing SMSF that you are not aware of, you should contact the other trustees or directors of your SMSF and any authorised representatives to check if they have made the changes,” it stated.

Additionally, it urged trustees who were concerned about changes made to their fund to contact them by phone, regardless of whether they believed any message was real or fake, and reminded SMSF members of the importance of ensuring their contact details were up to date.

“To safeguard your super, it’s important you keep your email and mobile phone details up to date as this will help ensure you continue to receive our alerts,” it stated.

“If you’re asked to provide or need to check or update any of your information for your SMSF, we strongly recommend going directly to our website.”

SMSF members were also reminded they should not provide specific financial details of a fund via SMS or email to the ATO.

The change comes after a senior SMSF specialist noted trustees may be ignoring communication from the ATO because they are wary of scammers operating by telephone.

The Federal Court has ordered Macquarie Bank to pay $10 million in fines for failing to prevent and detect unauthorised fee transactions conducted by an adviser on his SMSF clients’ cash management accounts.

The court ruled between 1 May 2016 and 15 January 2020, Macquarie failed to implement effective controls to monitor whether third-party bulk transactions under the fee authority were actually for fees.

Specifically, an Australian Securities and Investments Commission (ASIC) investigation found between October 2016 and October 2019, former Sydney-based financial adviser Ross Andrew Hopkins made 167 unauthorised transactions on 13 of his SMSF clients’ cash management accounts via Macquarie’s bulk transaction system, totalling $2.9 million.

Hopkins misappropriated the funds for personal use, including vacations, rent, credit card repayments, and settling personal loans. He was handed a six-year prison sentence and was permanently banned from providing financial services or controlling any entity carrying on a financial services business.

Commenting on the fine imposed by the court, ASIC chair Joe Longo stated: “Fraud controls are increasingly important and this case sends an important message to financial institutions and other financial service licensees that they must have appropriate controls in place.

“While Macquarie implemented effective controls from January 2020, its earlier failures meant that financial adviser Ross Hopkins was able to fraudulently withdraw around $2.9 million from his customers’ accounts without being detected by Macquarie.

“ASIC expects financial institutions to prioritise and invest in systems that protect their customers. Macquarie fell short of its obligation to do all things necessary to provide its financial services efficiently, honestly and fairly and as a result it has become liable for a substantial penalty.”

According to ASIC, Macquarie allowed its customers to give third parties, such as financial advisers, stockbrokers and accountants, different levels of authority to transact on their accounts, including a limited authority to withdraw the third party’s fees.

Macquarie also made available to third parties a bulk transacting tool to make multiple withdrawals across multiple customer accounts simultaneously.

SMSFs with a member facing a disability or death event should consider using the future services liability deduction as an alternative to winding up as it offers certain tax advantages on any future contributions made to the fund, according to a senior technical specialist.

Smarter SMSF education and technical manager Tim Miller pointed out the deduction could be claimed by the fund if another member has either died or received a disability benefit prior to age 65.

Miller said the deduction is based on the future portion of the entirety of the lump sum or pension commencement and could be a viable alternative to winding up an SMSF in certain circumstances.

“If we’re seeing members of the fund pass away and we’re able to claim this future liability deduction, then in most instances that is going to create a significant tax loss for the superannuation fund,” he told attendees of a SuperGuardian webinar held last week.

“That tax loss [can be] utilised to offset contributions tax and other things, as well as capital gains along the way, so [it’s] very beneficial.

“[If you have] the death of a member where they’re under 65, and the other member [of the fund] says ‘I don’t want to manage the fund anymore’, if they’ve got access to this future liability deduction inside the SMSF, then by retaining the fund, they may be able to offset the contributions tax for a number of future years, which could be significant.”

As such, he used an example to illustrate how the deduction might work in practice.

“I had a situation about three weeks ago with a client who had a $2 million insurance payment payout. They passed away at age 51, so they’ve got 14 years of future service period,” he said.

“And ultimately of that $2 million, they only had a balance of a couple hundred thousand in their self-managed superannuation fund, but the total benefit payment was going to be $2.2 million.

“The future service deduction based on their service period was going to be a tax deduction of $800,000 if they were eligible to claim it.

“Now that $800,000 for their spouse who was the same age would suggest that spouse will never pay tax on contributions again because they’re not going to make $800,000 worth of capital gains or contributions over the next 15 years.

“And if they do, it’s going to be at the tail end, potentially, where they look at moving into pension phase. So the loss of tax losses is certainly a significant one if you’ve got them inside the super fund.”

Cloud-based advice platform intelliflo has added a cash-flow modelling feature to its software offering tailored for SMSF advisers.

The latest update to the intelliflo office suite allows advisers to create a fully compliant, hypothetical SMSF and simulate and analyse the impacts of various scenarios on a fund using detailed cash-flow inputs, projections and outputs.

Intelliflo Australia product strategy lead Stephen Wirth explained the new feature was introduced to support the growing SMSF sector and assist practitioners in navigating an increasingly sophisticated regulatory environment.

“SMSFs can include a variety of inputs – including properties, physical assets, investments, liabilities and expenses – all of which can now be included in detailed projections and better personalised advice for clients by advisers taking a deeper dive into SMSFs and conducting ‘cash-flow within cash-flow’ reviews,” Wirth said.

“Supporting advisers who are managing clients with more sophisticated multi-entity advice needs is a priority for us to help our customers ensure the overall end-to-end advice journey from client onboarding to advice presentation is integrated, intuitive and innovative.”

The platform provider stated the addition of the modelling tool was the first in a planned series of updates to its intelliflo office software.

Intelliflo launched operations in the Australian market in March last year following a successful trial of its financial advice software.

The software has been specifically designed to comply with Australian superannuation rules, aiming to support advisers who manage super and SMSF clients.

The global advice platform currently supports over 30,000 financial advisers worldwide and administers more than $1 trillion on behalf of 3 million clients.

SMSF advice firm Eureka Whittaker Macnaught will merge with Brisbane-based Blue Harbour Financial Partners in an effort to bolster the firms’ value proposition to their clients.

The merger will see both businesses retain their brands in the short term and the combined entity will employ 32 people, including 14 financial advisers, across five locations. Eureka Whittaker Macnaught co-founder and chief executive Greg Cook and general manager Sally Bell will head up the management team of the business.

According to Cook, the merger is focused on enhancing the firm’s scalability in providing superannuation, retirement and estate planning advice and services as part of its broader growth strategy.

“I’m very excited about our future. Our mission is to be our clients’ trusted adviser and the ringmaster of their financial affairs, which is a key driver behind our growth strategy and recent decision to establish a mortgage and lending business,” he said.

“We also have great capability with self-managed super and aged-care advice, and we have great advice relationships with industry superannuation.

“Eureka Whittaker Macnaught has experienced strong growth, both organically and through mergers and acquisitions, and we have ambitious plans to become a formidable, multidisciplinary super firm.”

Blue Harbour Financial Partners chief executive Todd Hitchcock welcomed the announcement and said he was looking forward to working alongside the team at Eureka Whittaker Macnaught to expand service offerings to existing and potential clients.

“I’ll still be involved in the business and I’m always thinking about the future to ensure that the business will be around for a long time to serve our people and our clients,” Hitchcock said.

Both Eureka Whittaker Macnaught and Blue Harbour Financial Partners are part of the AZ NGA Group, a collective of financial advisory firms.

A proposal to simplify the application of binding death benefit nominations (BDBN) across all forms of superannuation has received broad support among SMSF practitioners, according to a senior legal specialist.

DBA Lawyers special counsel Bryce Figot said the Law Council of Australia (LCA) approached Treasury in January with recommendations to change the current regime for BDBNs, primarily to remove some of the ambiguities about how they operate.

“[The LCA proposed] a binding death benefit nomination can nominate anyone because right now, for example, I can’t arrange my super upon my death to be paid to a charity or, typically, you can’t [pay it to] a friend or a grandchild,” Figot told attendees at an online briefing hosted by DBA Lawyers last Friday.

“[Additionally], superannuation death benefits would automatically form part of a deceased person’s estate unless the deceased made a binding death benefit nomination.”

He added the LCA also proposed a BDBN could not be made or modified by an enduring power of attorney (EPOA), unless the EPOA document appointing someone as an attorney expressly authorised this, and all BDBNs would be non-lapsing and last indefinitely.

As a measure of support for the proposed recommendations, 93 per cent of SMSF professionals attending the webinar agreed via a poll that the implementation of the reforms would be a positive development.

“It’s quite different to the landscape which we’re used to. I like [the recommendations], I think they’d be good changes, not so much for lawyers, but good for the industry,” Figot said.

“Those [reforms] may well become the law. The Law Council of Australia is not a wacky fringe body. If they recommend something, it may just happen.”

While the proposed reforms were welcome, he advised practitioners and trustees of the current standard expected with regard to documentation when drafting a BDBN.

“Ensure the full SMSF document trail is perfect. [This] means you have the full physical original establishing deed, you have all full physical original deeds of variation [and] you have all full physical change-of-trustee documentation,” he said.

“The current governing rules should allow for indefinite binding death benefit nominations. All the above needs to be correctly drafted.

“This is not a case of close enough is good enough and all of the above has to be correctly executed. I believe that’s best practice [when] the binding death benefit nomination is correctly made.”

An ATO decision to extend the timeframe for cancelling an Australian business number (ABN) has addressed one of the most common problems trustees experience when winding up an SMSF, according to a technical specialist.

Smarter SMSF technical and education manager Tim Miller acknowledged the introduction of the requirement to use SuperStream had created a specific administrative hurdle for trustees and practitioners when rolling over entitlements from a fund.

“We came across issues where the tax office had cancelled the Australian business number, so we’d actually lodged the final return for the fund and the ATO had cancelled the ABN within 14 days,” Miller told attendees of a SuperGuardian webinar held today.

“Often within that 14-day period, the refund had come back from the ATO for the final return, but there was an inability to actually process the SuperStream rollover because the ABN had been cancelled.

“You couldn’t go through the process. There could be no verification [because] the fund wasn’t on the look-up system and so Australian Prudential Regulation Authority-regulated funds weren’t able to accept the money.”

He said he had approached the ATO for guidance to support clients who might be caught in this situation.

“That led us down the path of communicating with the tax office about what the options were [in this case]. The primary position that they came back with was that you had to apply for specific fund advice to get a resolution from the ATO, which seemed an illogical approach,” he said.

“They could, in certain circumstances, reinstate the ABN, but that was then going to delay the rollover process even longer.

“We eventually saw the tax office expanding the cancellation window of the ABN from 14 days to 28 days, which ultimately gives funds more time to be able to finalise that last rollover.”

Additionally, he highlighted the proposed Division 296 tax as something that could lead trustees to increasingly consult SMSF advisers for help with closing down a fund.

“I did a roadshow throughout March [and] we posed the question to attendees: how many of your SMSF clients have indicated that they may consider winding up their self-managed superannuation fund because of the introduction of Division 296 and the additional 15 per cent tax?” he noted.

“I was actually quite staggered to see how many people were contemplating it. Certainly from an advice point of view, we really need to be clear to people what the taxation outcome is going to be by retaining money in super versus pulling that money out of super.

“We don’t want people to jump the gun unnecessarily and wind up superannuation funds too early, because once a wind-up is done, it can’t be undone.”

Investment advice and education firm Rask and wealth management platform InvestSmart have launched three exchange-traded fund (ETF) portfolios on their joint investment service, which debuted last month.

Rask Invest will offer three portfolios – passive income, growth and high growth – via the InvestSmart platform. Under the arrangement, Rask will be the external investment manager of funds, while InvestSmart will provide the back-end administrative, compliance and technology platform.

According to Rask founder Owen Rask, the white-label service had been developed to meet market demand and has received a positive response, with over 600 investors placed on the waiting list for the offerings.

“Over the past six years, we have built a 200,000-strong community of highly engaged investors. Our community is diverse in terms of age, net wealth and investing experience, but share a desire for trusted investing information and guidance,” Rask said.

“While it is early days, we’re really excited by the initial traction, which has reinforced the InvestSmart-Rask proposition that can be leveraged by all types of investors.

“Given the transparency, security of assets held on holder identification numbers and scalability, so far it is proving very popular with direct investors via their SMSF, family trusts or even kids’ accounts.

“We’ve also begun to engage with very high-quality financial advisers, who are eager to outsource select clients to a trusted investment partner who can automate the client’s investment journey.”

InvestSmart chief executive Ron Hodge said the new service will appeal to individuals who are seeking the stability of a professionally managed portfolio but may not be able to afford traditional investment advice.

“We see our technology stack as robo-advice 2.0. A further step in democratising retail investors’ access to professionally managed investment portfolios, without the hefty fees charged by traditional fund managers,” Hodge noted.

“The platform is not just a rebrand of InvestSmart portfolios. Our aim is to empower advisers, stockbrokers and financial institutions to create and manage their own ETF portfolios, using InvestSmart’s technology for compliance, trading and administration.

“With 49 per cent of investors aged between 25 and 49 years old, there is a broad demographic who either can’t afford professional advice or don’t see the value in it, but should have some of their investments professionally managed.

“Wealth management is changing. Firms need to innovate with technology to ensure they capture the trust and imagination of future investing generations.”

The Australian Securities and Investments Commission (ASIC) has initiated legal action against three blockchain mining companies and their directors for allegedly encouraging investors to convert their SMSF funds into cryptocurrencies.

The corporate regulator applied for orders to be made against Brett Mendham, Ryan Brown and Mark Ten Caten and the companies they directed, NGS Crypto Pty Ltd, NGS Digital Pty Ltd and NGS Group Ltd, which were subsequently granted by the Federal Court on 10 April.

Following an investigation, ASIC alleged the NGS companies encouraged individuals to invest in blockchain mining packages with fixed-rate returns using funds transferred from Australian Prudential Regulation Authority-regulated funds into SMSFs and then converted into cryptocurrencies.

The investigation found 450 Australians invested more than $62 million with the companies, with the regulator taking action over concerns the digital assets held by those investors were at risk of being lost or misused.

The Federal Court appointed Anthony Connelly, Kathy Sozou and Jamie Harris of McGrathNicol as receivers over the digital currency assets of the NGS companies and of Mendham, Brown and Ten Caten. Additionally, the court made travel restraint orders to prevent Mendham from travelling outside of Australia.

Specifically, the regulator alleged the NGS companies contravened section 911A of the Corporations Act by providing financial services without an Australian financial services licence (AFSL).

As part of the proceedings, ASIC is also seeking interim and final injunctions against the NGS companies, preventing them from providing financial services in Australia without an AFSL.

ASIC chair Joe Longo stated: “Australians who decide to self-manage their super should consider the risks before using their SMSF to invest in crypto-related investment products such as blockchain mining.

“These proceedings should also send a message to the crypto industry that products will continue to be scrutinised by ASIC to ensure they comply with regulatory obligations in order to protect consumers.”

ASIC urged impacted investors to contact the receivers at McGrathNicol with any queries as the investigation into the conduct of the NGS companies continues.

SMSF members should consider whether to make a pension reversionary if they are looking to minimise the likelihood of being caught by the proposed Division 296 tax, a legal specialist has advised.

DBA Lawyers special counsel Bryce Figot noted certain pensions carried risks in regards to the $3 million soft cap because of the treatment of different elements of a death benefit under the impost.

“I actually think a non-reversionary pension is the way to go as far as the Division 296 tax goes,” Figot told attendees at an online briefing hosted by DBA Lawyers last Friday.

“[That’s because if I died] on 12 April 2026 with $2 million and [my wife] has $2 million, both in automatic reversionary pensions at the end of the 2026 year, her total super balance will be greater than $3 million and she will be in the Division 296 tax net.

“There’s a whole extra year when she’s in that Division 296 net when she would not have been simply because of the automatic reversionary pension.

“If, however, I died with a non-automatic reversionary pension and you waited for a couple of months until it’s the next financial year, she would escape the net for the next year.”

He added this irregularity existed due to the methodology used to calculate a tax liability with regards to a member’s total superannuation balance (TSB).

“[The] current adjusted TSB has certain modifications. You subtract the capital of the death benefit pension, regardless of reversionary or non-reversionary, and pension payments from death benefits are added back,” he said.

As such, he advised reconsidering whether a death benefit pension needs to be reversionary so as to minimise the impact of the proposed tax on a death benefit.

“Just as a rule of thumb, everyone’s going to be a bit different because there’s a lot of other things to consider, but for couples who in total have more than $3 million, even if individually they don’t, you probably might want to strongly consider non-reversionary pensions,” he said.

Practitioners dealing with SMSFs holding digital assets may face significant professional liability risks if the investments are prohibited under the fund’s governing documentation, according to a technical specialist.

ASF Audits head of education Shelley Banton noted a provision included in the Superannuation Industry (Supervision) (SIS) Act could expose practitioners to potential legal action if this situation were to materialise.

“One thing to consider from a risk management point of view is that under section 55, a person who suffers a loss or damage as a result of investing in an asset which is not covered by the investment strategy or the trust deed can recover that loss or damage if there’s a contravention against another person who’s involved in that contravention,” Banton told attendees of The Tax Institute’s Super Intensive held online recently.

“So don’t be that auditor, that accountant, that financial adviser, or anyone else in the SMSF food chain who didn’t do their job properly because if the trustee’s lawyers can prove a breach of duty and care, you’re going to be in the firing line if the fund suffers a loss.

“We saw that play out in the Baumgartner case, where legal liability was proven in court against the SMSF auditor because they didn’t bring the deficiency of the investment strategy to the trustee’s attention. And in that fund they invested in high-risk unlisted entities and loans which weren’t covered in the [SMSF] investment strategy.

“This is where being a little bit more pedantic can reduce your legal liability, notwithstanding the fact that it’s probably not very favourable with your clients.”

As such, she shared three factors all SMSF professionals need to consider to protect themselves from potential legal action by a trustee seeking to recoup losses from a failed investment.

“Did the digital asset pass the sole purpose test? As we know there is nothing that stops the fund from investing in crypto as long as it complies with the SIS rules and it’s a permittable acquirable asset,” she noted.

“Does the trust deed explicitly stop trustees [from] investing in digital assets? Probably not, but we may actually see these clauses enter into trust deeds [more] once trustees have been bitten by crypto and other digital assets, and they may be included to stop [trustees] investing in this asset class in the future.

“The [investment strategy] needs to specifically allow for these types of investments where they’re material. And at the bare minimum, you want to see in the risk section that [the trustee has] addressed secure storage of the wallet and the private key.”

A senior adviser has urged auditors to closely examine situations where a fund member performs multiple rollovers between an SMSF and a retail fund solely to optimise tax concessions on total and permanent disability (TPD) benefits.

“The mischief with TPD benefits that we see from time to time [is] members who have rolled over [between a retail fund and an SMSF] more than once to obtain a [tax] uplift and dilute the taxable component of the benefit,” Fitzpatricks Private Wealth head of strategic advice Colin Lewis told attendees of a webinar hosted by The Auditors Institute yesterday.

“[For example], where a member who’s become disabled in their SMSF wishes to commence an income stream from the fund. They’re running an SMSF [and] they want an income stream, but they want the tax-free uplift.

“They can’t apply the tax-free uplift in the fund that they’re taking the income stream from. So what they do is that they roll over to a public offer fund to obtain the tax-free uplift and then roll back to the SMSF to commence the account-based pension to get the 15 per cent offset.

“The problem arises where the trustee of your public offer fund has treated the rollback as a disability superannuation benefit and has given a further tax-free uplift. They’re double-dipping. In other words, they’re getting the tax-free uplift twice, plus the 50 per cent tax offset on their income stream.”

Lewis clarified auditors are unlikely to encounter any compliance issues if a rollover has occurred just once as this aligns with standard industry practices.

“There is no problem where the trustee of the public fund just transfers the money back into the SMSF. They’re not treating it as a disability super benefit and there’s no further tax-free uplift. It’s only where they’re getting multiple tax-free uplifts,” he said.

Additionally, he also took the opportunity to remind practitioners of the importance of ensuring any medical documentation regarding a TPD event was up to date.

“Be careful of use-by dates on medical certificates because you can’t use something that’s five years old. They need to be current,” he said.

“Medical certifications, when you’re dealing in the public offer fund space, require new certifications when they’re more than two or three years old. Anything older than that is ancient history and requires the trustee to receive new documentation from the member.”

Global X ETFs has launched an artificial intelligence (AI) exchange-traded fund (ETF) offering diversified exposure to companies that stand to benefit from the further development and use of the technology.

The Global X Artificial Intelligence ETF, carrying the Australian Securities Exchange (ASX) code of GXAI, will track the Indxx Artificial Intelligence and Big Data Index, which includes technology giants Nvidia, Meta, Netflix, Tencent and Amazon in its holdings. The ETF has a management fee of 57 basis points.

Global X chief executive Evan Metcalf said the potential uses of AI created an avenue for investors to access growth opportunities while the sector continues to develop.

“Artificial intelligence is still maturing and with this natural evolution comes the potential opportunities for new applications. GXAI offers investors a way to target the rapid advancements and capabilities of AI technologies across a range of industries and a diversified selection of companies,” Metcalf noted.

“We believe there is a big appetite for AI-related ETFs in the local market as Global X has already seen a combined $125 million in flows this year to date across the Global X FANG+ ETF (ASX: FANG) and the Global X Semiconductor ETF (ASX: SEMI), which offer exposure to subsets of the AI theme.

“AI is not a flash in the pan; it’s a structural shift which will change industries and life as we know it. Australian investors can use GXAI to invest in leading companies across the value chain of this megatrend which are positioned to benefit from AI adoption and innovation.”

Global X head of thematic solutions Scott Helfstein added the fund will aim to distribute risk across its portfolio and will appeal to investors seeking diversification.

“While GXAI captures some of the most prominent names in the AI sector, such as Netflix, Adobe and Nvidia, it applies moderation through a single-stock cap exposure of 3 per cent. This acts as a natural portfolio diversifier and presents a more balanced portfolio which thoughtfully targets the AI theme,” Helfstein noted.

“In the past 12 months, we’ve seen an increased global appetite to capitalise on the growth potential of AI technologies and we expect this momentum to continue. It is important for investors to have strong, well-tested investment vehicles at their disposal to capitalise on this important thematic.”

The launch of the offering adds to Global X’s suite of 36 ETFs following the release of a cybersecurity fund last year.

SMSF auditors should be aware of situations where a member may be using a transition-to-retirement income stream (TRIS) to gain access to their superannuation entitlements illegally, a senior adviser has warned.

“When you’re doing audits, watch out for members who commence a TRIS, having taken a 10 per cent [pension] payment and then commuted it back to accumulation phase,” Fitzpatricks Private Wealth head of strategic advice Colin Lewis said during a webinar presented by The Auditors Institute today.

“The problem here is their motivation is purely a tax-driven strategy [because] basically they need the money, or they could be doing it to manipulate their total super balance.

“If a member has done this, then they haven’t run an income stream. If they haven’t run an income stream, then they can’t have had a TRIS.

“If they’ve accessed their super benefits without satisfying a condition of release, and they haven’t had a TRIS, then they’ve actually accessed their super illegally [and] the tax office [is] concerned about that [behaviour].”

According to Lewis, the ATO made it clear this strategy was prohibited in Taxation Ruling 2013/5.

“The problem is that a pension that comprises one payment only is not an income stream. If you go back to the tax ruling in 2013, it says the feature of this strategy will not satisfy the liability to pay a member a series of payments and thus will not be a super income stream,” he said.

“What I’m talking about here is somebody who is deliberately starting an income stream, takes a payment and then stops that income stream.”

Additionally, he shared several examples from his practice of why a trustee might employ the use of this strategy outside of accessing their super money early.

“The [member] may be wanting to lower their total super balance [to make non-concessional contributions]. Or they’re wanting to use the bring-forward rule on those thresholds,” he said.

“They [may] want to access the unused concessional contribution cap now, which is based on a $500,000 total super balance of the previous 30 June.

“Or they want to use the segregated method to determine their exempt current pension income, where they’ve got disregarded small fund assets.

“The important thing is any person who’s commenced a TRIS must do it on a genuine intent of running an income stream, not to pull money out of super.”

The Australian Financial Complaints Authority (AFCA) has flagged concerns over financial institutions neglecting customers seeking assistance due to financial difficulty following a surge in complaints from this cohort in 2023.

AFCA chief ombudsman and chief executive David Locke said the authority had received 5396 complaints from consumers relating to financial difficulty or hardship in 2023, a rise of 25 per cent on the previous year.

Of those complaints, more than half concerned a lender’s failure to respond to a request for hardship assistance and a third related to assistance with home loans.

While Locke noted more people seeking hardship assistance was unsurprising given the challenging economic environment, the amount of complaints received regarding entities who had not actioned a request or contacted the person making the application was disappointing.

“We are concerned about the increase in complaints about financial hardship and about the practices of some lenders. We urge all lenders to identify hardship early and to ensure they provide genuine consideration to a customer’s request for hardship assistance,” he said.

“Lenders were preparing for [applications to obtain financial hardship assistance] too and we acknowledge the investments some have made in specialist hardship teams and better processes. But the rise in complaints tells us there is still work to do.

“[A majority of] these are not complaints about what the lender’s decision was, but consumers saying there was no response at all. Failure to respond to such a request is a breach of the lender’s obligations and there is no excuse for this.”

AFCA stated it had also witnessed a significant number of complaints where lenders had provided a standardised response that did not consider the customer’s individual circumstances.

“Care needs to be taken with automated processes. Lenders are required to give genuine consideration to hardship requests,” Locke said.

AFCA banking and finance lead ombudsman Natalie Cameron advised individuals caught in this position to take proactive steps as early as possible to ensure a favourable outcome.

“Don’t wait until overdue repayments and arrears are already accumulating. Act quickly so as many options as possible remain open to you. We’d also encourage people to seek help from a free financial counsellor sooner rather than later,” Cameron noted.

“Borrowers who are not happy with the response to a hardship request can make an internal complaint to their lender to have the decision reviewed. The bank generally has 30 days to respond to a complaint.

“If they remain unhappy after the complaint has been considered by the lender, or the complaint hasn’t been considered in time, they can access AFCA’s free and impartial dispute resolution service.”

An SMSF legal expert has identified a potential anomaly contained in the draft legislation for the implementation of the Division 296 tax on the earnings of total superannuation balances above $3 million with regard to the transfer balance cap and paying a pension to a fund member.

Cooper Grace Ward partner Scott Hay-Bartlem noted the issue has arisen from the fact the measure is not subject to indexation.

“Your total super balance includes pensions, so if we don’t index the cap, eventually your transfer balance cap will be higher than the $3 million cap,” Hay-Bartlem told attendees at his firm’s 2024 Annual Adviser Conference in Brisbane recently.

“Which means eventually you’re going to be able to have more money in pension than last year’s [transfer] balance cap, which just seems ridiculous. So [this tax] is really quite messy when you start looking at it.”

He pointed out if the bill moves forward without an indexation measure, there will be far-reaching consequences for many superannuants. As such, he and the SMSF Association had entered into discussions with the teal independents and the Senate crossbench to push for indexation to be applied to the $3 million cap.

“The $3 million cap is not indexed at all, ever, so [it’s going to capture] more and more people,” he noted.

“Yes, you may not pay the [tax] now, but what happens in 20 years’ time when you might be looking at retiring? Will you have more than $3 million? How has inflation been running?

“Your children [may] have more than $3 million. If you have a couple, it’s $3 million each until one of you dies, in which case it’s $3 million for both super balances. So there are a range of ways that the non-indexation of this cap will really start to bite in a couple of years.

“Indexation [of the $3 million cap] is something that the teals and the crossbench in the Senate are interested in and we’ve been lobbying them very hard to try and at least get indexation in.”