13 July 2018
The Australian Government’s Productivity Commission recently highlighted the benefits delivered to Superannuation Fund members through “tax aware” investment strategies. Utilising GBST’s patented and market leading tax solution technology, funds can manage their tax positions across all portfolios.
Tax is often the single largest cost to superannuation funds, significantly larger than the impact of management and performance fees, which are often the focus when evaluating fund efficiency and value to members. GBST Tax solutions allow superannuation funds to manage and deliver more efficient tax outcomes, resulting in a reduced tax position and improved net returns for their members.
In 2016 the Australian Government asked the Productivity Commission to undertake a review of the competitiveness and efficiency of the Australian superannuation system. The Commission was asked to make recommendations to improve outcomes for superannuation fund members.
The Productivity Commission has since conducted an extensive inquiry into the superannuation system’s performance by looking at how individual members are benefiting and how outcomes can be made better for Australians when they retire.
On the issue of tax management, the Commission draft report states:
“There are well documented difficulties in implementing Tax Aware Investment Management (TAIM), however some large funds, including Mercer, Australian Super and UniSuper have made public their use of external consultants to optimise tax management (GBST 2017). This suggests that at least some funds are taking this relatively new obligation seriously, and also that it is not prohibitively difficult to implement”.
While the Commission acknowledges that varied performance as well as problems within the superannuation system can compound over time to add to, or erode, members’ retirement balances, GBST Head of Asia Pacific, Denis Orrock said tax leakage as part of the investment process did not need to be one of the problems that superannuation funds had to deal with.
“This is the fundamental driver for GBST investing in the development of the GBST Tax Analyser platform – to help superannuation funds and their investment managers manage tax pro-actively throughout the investment process in a seamless manner.”
“Without the capability provided by our patented tax platform, managing tax holistically through the investment process is difficult to do, “ he said.
GBST’s Tax platform was designed with the MySuper legislation front of mind which requires Superannuation Funds to be cognisant of tax leakage not only after the fact but, more importantly, during the investment management process.
The report also stated that the cost of tax inefficiency ranges from five to 200 basis points per year.
“As per the Productivity Commission report, solutions such as the GBST Tax Analyser facilitate the proactive management of tax positions and allow superannuation funds to take positive steps in the optimisation of the fund’s overall tax position to deliver members improved performance, resulting in greater returns to members which must be the ultimate goal of any superannuation fund and indeed the entire industry.” Mr Orrock said.
Denis Orrock | Head of Asia Pacific | GBST
D: +61 2 9253 6540 | M: +61 401 285 176 | F: +61 2 8580 5245 | www.gbst.com
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Posted in: Tax and quantitative, Wealth Management Administration
