22 Aug 2017
Self Managed Super Funds (SMSF): 17%
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
The SMSF is a problematic administration vehicle for superannuation because it gives a client the illusion of control while at the same time materially increasing the client’s exposure to liability.
Essentially, a SMSF administration vehicle moves all responsibility from an unrelated third party trustee to the client which is a member of the fund.
Breaching the Superannuation (Industry Supervision) Regulations 1994 is as simple as not documenting investment decisions, not keeping adequate financial records of transactions, using funds to invest in a holiday house for members and or lending money to members.
The direct responsibility for any such breaches lies with the trustees which include each and every member in the SMSF.
If found negligent, the SMSF can be deemed non-complying which carries a 50% penalty on the value of the assets or the ATO can choose to charge Penalty Units which have just increased from $180 to $210 or 17% from the 1 July 2017.
That is why a Public Offer administration vehicle for superannuation such as a master trust or wrap is often the best and least expensive structure to use UNLESS the investment strategy in superannuation is to buy direct real property and or to buy shares in an unlisted company where there are no related parties.
Fortunately, our primary concern is for the capital invested to beat the respective benchmark after fees irrespective of whether the administration vehicle being used is a SMSF or a Public Offer super fund.
At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.