Matthew Richardson, SMSF manager for Accurium, said in a recent webinar that the first step to take before setting up an SMSF is to determine whether it is the most suitable option – not just for the client but also the adviser who may be working with them.
“The first thing to do before an SMSF is set up, or we start taking those steps to set it up, is to determine whether it is even suitable,” Richardson said.
“Any clients looking at starting an SMSF, the first question should be, ‘Is this the best choice for me?’, from both your financial goals and from whether the members themselves have the ability to manage that SMSF and to be trustees of this fund.”
Richardson said statistics from the ATO illustrate that not understanding or fully appreciating the duties that trustees have, or not being fully educated about the rigorous compliance issues involved, can result in breaches and financial impacts.
He noted that in 2022–23, 41,500 auditor contravention reports were lodged for 15,200 SMSFs with the main areas of focus being loan/financial assistance, in-house assets, and separation of assets.
“As an SMSF member, and as an SMSF trustee, we know the requirement is on them in the end, and we want to make sure that they’re not doing something that they won’t be able to manage,” he said.
“A couple of years down the line stands out. They didn’t really know what’s going on. There are problems with the fund, and that can cause issues for them, which we don’t want. We want to make sure that any SMSF client is doing the best thing for them, whether it’s an SMSF or a different retirement structure.”
Richardson recommended that before a client begins the establishment process for an SMSF, advisers should encourage them to undertake the ATO education courses that are available online.
“We should always encourage any prospective SMSF members to look at and review this information to ensure that they know what being a member of SMSF is going to entail.”
The ATO guidelines and education modules include topics such as why an SMSF, is it suitable, thinking about self-managed super (QC 23301), comparing SMSFs with other super funds, considering the cost, time and skills, and SMSF education products (QC 67369).
Furthermore, Richardson emphasised that there are also restrictions on financial professionals as to who can advise on the establishment of an SMSF and the type of advice they can provide.
“We need to remember that there are restrictions. An SMSF is a financial product, so to recommend the commencement of one, you would need to be licensed,” he said.
“For accountants they can provide factual information, but they want to be careful and there are places where you can find information in regard to what professionals can do in this space.”
These include the ASIC information sheet 274 (INFO 274) – Tips for giving self-managed superannuation fund advice – and information sheet 216 (INFO 216), AFS licensing requirements for accountants who provide SMSF services. There is also a joint CPA and CA ANZ publication, Financial Advice and Regulations: Guidance for the Accounting Profession.
“Once a client knows and understands the requirements, and they’re comfortable that it is the appropriate choice for them, then you can start the set-up process,” Richardson added.
