Regulators ask the big four SMSF questions

By Michael Bailey

Anticipating a flood of self-managed superannuation funds being set up after July 1, the Australian Taxation Office (ATO) and the AustralianSecurities and Investments Commission (ASIC) have jointly released a fact sheet highlighting the four main issues that would-be do-it-yourselfers should consider.

The first question, “Is the fund strictly for retirement benefits only?”, aims to dissuade people who think they can include “holiday homes and golf club membership” in their fund and enjoy them before retirement, Tax Commissioner Michael Carmody said.

The second question, “Do you have the time and skills?”, hammers home the reality that an SMSF operator “does all the work”, including setting an investment strategy and keeping meticulous records for compliance purposes.

The third question, “Will the benefits be worth the cost?”, is complemented by an outline showing that SMSFs typically cost $1,700 or more to run each year, and those with less than $200,000 would struggle to earn an investment income which exceeded this amount.

The fourth question, “How will switching to a self-managed fund affect your current super?”, warns consumers against leaving behind insurance benefits and lower fees that may prevail in their current fund.

“ASIC and the Tax Office have suggested these four questions because SMSFs are more complex and expensive to set up than many people realise,” said ASIC chair Jeffrey Lucy.