'Free’ SMSF setup penalty highlights risks for trustees

Self-managed superannuation fund (SMSF) trustees are being warned that they will pay the price for poor product selection if they fail to ensure fund compliance under a new penalty regime.  

Townsends Business & Corporate Lawyers principal, Peter Townsend, said offers such as the recent SuperHelp 'free SMSF and pension setup’ advertisement, could see fund trustees pay the price for failing to identify hidden costs when they select products. 

Townsend said Australian Securities and Investments Commission (ASIC) fined SuperHelp $10,200 earlier this year, after it found the ad to be “false and misleading”. 

Following an investigation ASIC discovered that the offer for a free SMSF setup was conditional on the payment of a one year subscription fee before the fund would be established, which the regulator was concerned could lead consumers to make “inappropriate financial decisions”, as the advert did not clearly state the fees and costs associated with the promotion. 

“As the saying goes, 'there is no such thing as a free lunch’, so when making decisions regarding SMSFs, it is vital that the true cost of the service is considered, and not only in a financial sense,” Townsend said. 

“As the new penalty regime for SMSFs draws closer [which comes into effect from 1 July], advisers and their clients need to be aware that poor product choice could see trustees being hit with heavy penalties if they are not careful in ensuring fund compliance.”