Australian Securities and Investments Commission (ASIC) recently released a report after reviewing 250 self-managed super funds (SMSF) files. These SMSFs were randomly selected based on Australian Taxation Office (ATO) data.
The report highlighted a poor standard of advice provided on SMSFs. They found 91% of the files reviewed were non-compliant. Non-compliant advice included process failures, poor record keeping and increased risk of financial loss for lack of investment diversification mainly due to a single investment property.
An SMSF allows a member to purchase property within the superannuation environment and I am often asked about how to facilitate this. However, what most clients do not realise is that property is capital intensive, costly to maintain and tends to offer a very low income. An SMSFs sole purpose is to provide retirement benefits for the members or their dependents. Therefore I have to ask my clients, is property appropriate for your retirement when you need to draw an income?
At The Investment Collective, we assess the appropriateness of an SMSF for every client. We look at many factors and alternatives and then provide a detailed analysis for our clients’ to make an informed decision. If you have thought about establishing an SMSF you should consider the following:
- The balance of your superannuation
- Costs involved to set up and running an SMSF
- According to ASIC a starting balance below $200,000 the setup and operating cost are unlikely to be competitive with other options
- Willingness and ability to manage the SMSF and meet trustee obligations
- An investment strategy that suits the needs of members
- Members Insurance needs
- Lack of government compensation available for SMSFs
Please note this article only provides general advice, it has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today.