Accounting groups warn Treasury on SMSF privacy

Mike Taylor

Managing Editor/Publisher, Financial Newswire

9 January 2023

The Federal Government has been warned that moves to create a beneficial ownership register for companies and other entities could jeopardy the privacy of members of self-managed superannuation funds (SMSFs) and small APRA funds.

The warning has come from the major accounting bodies, CPA Australia and CA ANZ, which have used a joint submission to express support the creation of an ultimate beneficial ownership register to support stronger regulatory and law enforcement but have warned against the Treasury’s proposed methodology.

It warns that the proposed methodology contained in a Treasury consultation paper would require over three million unlisted entities to “publicly self-report a concept of ownership which is neither legal ownership no ultimate beneficial ownership” but “rather a hallway house between the two concepts”.

On the question of SMSFs and small APRA funds, the submission says the Treasury consultation paper proposes that where there are trusts (including SMSFs and small APRA funds but not registrable superannuation entities) entities will be obliged to take reasonable steps to identify, verify and record all of the trust’s beneficiaries on its ownership register.

“Where there is a chain of trusts, the entity will need to trace through the chain. Figure 4.3 of the consultation paper indicates that the ownership register will contain details of the trust such as its trustees, beneficiaries, settlors, appointors, and members,” it said.

“Feedback from our members indicates that this is where matters become complex. For example, a discretionary trust may not be for a specific beneficiary (or beneficiaries) and a copy of the trust deed may need to be on the public record for people to see who the potential beneficiaries are.”

“Putting a trust deed on the public record could reveal a substantial amount about the personal life and financial circumstances of the entities involved in the trust arrangements. The outcome is that a large number of people could be listed even though they have not benefited from the trust as they form part of a broad class of beneficiary. This would not be helpful in determining ultimate beneficial ownership and may result in questions being asked by other agencies such as Centrelink.”

The submission suggested an alternative approach involving the ATO continuing to share information with the appropriate law enforcement agencies about how trust distributions are actually made so that those law enforcement agencies can “follow the money”.

“This would be consistent with the ultimate beneficial ownership register being created and which would then be available to competent authorities in line with the FATF recommendation,” the submission said.