Overview
This segment features Liam Short from Sonos Wealth discussing ASIC’s review of self-managed super fund (SMSF) advice, key investor risks, and practical strategies for SMSF holders. The conversation covers regulatory findings, the need for tighter controls, strategic financial moves for those nearing retirement, and essential administrative recommendations.
ASIC Review of SMSF Advice
- Key Findings:
- ASIC reviewed 100 SMSFs, specifically targeting funds linked to previously flagged advisors or professionals.
- 62 out of 100 funds had advice that was not in the client’s best interest, despite some passing dealer group compliance checks.
- Issues often involved advisors or promoters (e.g., property spruikers, cryptocurrency sellers) setting up SMSFs primarily to sell their products, not to benefit the client.
- Regulatory Focus:
- ASIC and the ATO are now targeting problematic advice providers and high-risk product promoters.
- The review is not a random sample but an intentional check on suspected troublemakers.
Need for Tighter SMSF Regulation
- Current Gaps:
- Individuals can still set up SMSFs via accountants or online platforms without receiving proper advice.
- Some collapsed groups (e.g., UGC Property Group, Shield Master Trust) used SMSFs to funnel investors into risky or unsuitable products.
- Recommendations:
- Stronger regulations are needed to ensure clients’best interests are considered.
- Prospective SMSF holders should receive mandatory education and training before making significant decisions about their retirement savings.
Cooling-Off Period for Super Fund Switching
- Proposal:
- ASIC Chair Joe Longo suggests introducing a cooling-off period for switching super funds or transferring money, aiming to reduce fraud risk.
- Expert Opinion:
- Liam Short supports the idea, noting that rushed SMSF setups often indicate pressure sales or too-good-to-be-true offers.
- There is already some delay due to ATO checks on new trustees (about 25–27% are checked before approval), but a formal cooling-off period could further protect investors.
Transition to Retirement and Pension Phase Strategies
- Common Misconceptions:
- Many believe working past age 60 means delaying super access, but this is not always necessary.
- Smart Strategies:
- Debt Reduction: Use the minimum 4% pension withdrawal to pay down non-deductible debt before retirement.
- Tax Efficiency: Start a transition-to-retirement pension, withdraw funds tax-free, and salary sacrifice or make one-off contributions back into super to lower personal tax while rebuilding super balances.
- Example: Someone with high living expenses and a mortgage can use pension withdrawals to salary sacrifice, thus reducing tax and maintaining super growth.
Administrative Tips for SMSF Trustees
- Advance Payment of ASIC Fees:
- Pay the SMSF trustee company’s ASIC annual fee up to 10 years in advance to lock in current rates and avoid future increases or late fees.
- Late payment penalties are steep: $93 if late by one month, $411 if later, compared to the $67 annual fee.
- Particularly useful for those confident they will keep their SMSF long-term or have complex company structures.
- Enduring Power of Attorney:
- Essential for all adults; allows someone to manage financial matters, including SMSF affairs, if the trustee is incapacitated, overseas, or otherwise unable to act.
- Especially important for sole business people and older trustees to ensure continuity and avoid financial complications during health issues.
Key Takeaways
- ASIC is cracking down on poor SMSF advice, especially from previously flagged providers.
- Regulation and education for SMSF setup need strengthening to protect investors.
- Consider cooling-off periods for fund transfers to reduce fraud and rushed decisions.
- Use transition-to-retirement strategies to manage debt and tax efficiently.
- Pay ASIC fees in advance to avoid penalties and ensure compliance.
- Establish an enduring power of attorney for financial security and continuity.
