Whether you’re a superannuation novice, or a seasoned financial pro, chances are you’ve heard the words APRA mentioned when talking about finance in Australia. But what exactly does the APRA do, what do they have to do with your superannuation fund, and why should you care? Read on to discover all you need to know about this integral Australian financial institution
What does APRA stand for?
APRA stands for Australian Prudential Regulation Authority. It is a Government body that was established in 1998 after the Wallis Inquiry. This inquiry mandated that all existing prudential regulation be undertaken by one single Government body instead of multiple agencies. Because of this ruling, the APRA was created.
What does the APRA do?
APRA’s main objective is to regulate the Australian financial industry, ensuring the prudent management of all financial institutions within the country. Put simply, the APRA makes sure that financial institutions look after the interests of everyday people (beneficiaries) and their money. It does this by regulating financial entities in accordance with the laws of the Commonwealth. Financial entities under regulation of the APRA include:
· Some superannuation funds
· Credit unions
· Building societies
· Insurance companies
· Private health insurance companies.
What is an APRA regulated superannuation fund?
The superannuation industry is one of the institutions regulated by APRA in Australia. APRA regulated fund types include industry super funds, corporate super funds, and company super funds. Funds that are registered with APRA are referred to as registrable superannuation entities. A major benefit of having an APRA-regulated super fund is the peace of mind associated with not being responsible for fund compliance issues, as well as legal and accounting costs associated with meeting ATO compliance.
Does APRA regulate self managed funds?
Self-managed super funds (SMSF) on the other hand, are not regulated by APRA, but by the Australian Tax Office. There are numerous benefits to having a SMSF, such as greater flexibility, tax efficiency, and more control over where your money is invested. However, it’s the fund trustee’s personal responsibility to adhere to ATO regulations and ensure the fund is compliant. This means staying on top of ever-changing regulations and making changes to your investments where necessary. As an example, in cases of fraud or theft, non-APRA regulated funds cannot apply for Government compensation, with trustees needing to pursue compensation at their own expense. SMSFs are also not covered by the Australian Financial Complaints Authority (AFCA), where disputes involving registrable superannuation entities can be resolved free of charge.
What do SMSF trustees need to keep in mind regarding non-APRA membership?
Because SMSFs are not APRA regulated, trustees need to ensure that their funds remain compliant in an environment of ever-changing regulation. Failure to do so may result in actions such as:
· Administrative penalties
· Civil and criminal penalties
· Disqualification of a trustee
· Freezing of assets.
If you do decide to manage your own super fund, it is essential to stay up to date with superannuation compliance in Australia and make changes accordingly.
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