Speaking to SMSF Adviser, the SMSFOA’s Duncan Fairweather said the success of the SMSF sector “breeds envy and draws criticism” from industry counterparts.
“You’ll hear it said that self-managed funds are driving up property values, distorting capital allocation, investing too conservatively, investing recklessly, straining the budget, getting an unfair tax advantage and are costly to run,” Mr Fairweather said.
“We challenge each of these claims as they are often driven by ideology, or self-interest or are just plain wrong.”
Mr Fairweather said despite claims that SMSFs are used to gain an unfair tax advantage, members of SMSFs are subject to the same tax rules as members of managed funds.
“Critics are quick to point out the top 20 per cent of income earners get the lion’s share of super tax concessions but they don’t always acknowledge that the top 20 per cent also pay the lion’s share of income tax,” Mr Fairweather said.
“They get 57 per cent of the tax concession but pay 64 per cent of income tax. So, as you would expect, the value of their super tax break is proportionate to the amount of tax they pay, and actually a bit lower.”
Commenting on claims that SMSFs are costly to run, Mr Fairweather said for SMSFs with balances above $100,000, costs are comparable or lower to the costs of a managed fund.
“The real cost issue in superannuation is the fees charged by the large industry and retail funds which are estimated to have consumed a quarter of these funds’ returns in the past decade, a cost borne by their members.”
There is also “no hard eveidence” to back up the claim that SMSFs are driving up property prices, Mr Fairweather said, with low interest rates and a supply issue being a more likely driver.
“The real cost issue in superannuation is the fees charged by the large industry and retail funds which are estimated to have consumed a quarter of these funds’ returns in the past decade, a cost borne by their members.”
If, as Fairweather says, self-interest drives SMSF criticism, sanctimonious self-interest drives SMSF lobby. Please point out how an APRA fund member can invest in real business property, if everything is equal. Where is risk management in SMSFs, critical to long term savings? What about the impact of ageing on SMSFs, dominant trustees and shadowy advisers usurping the trustee role?If as Trio showed,SMSF trustees did not even know they were in SMSF, what hope can we have?
There are good SMSFs, but not all are run satisfactorily. Why does this matter? Because the taxpayer who provided concessios will be cosncripted again to pay the age-pension. And the taxpayer is us.
There is no one so blind as those who will not see. Don’t shoot the messenger, as the rifle is works two way: will shoot the shooter!
Well said. What a shocking idea that people might not trust the professional money managers who seem so adept at managing things so well – for themselves.
Ever since demutualization, many of these once respectable institutions have lost much of the trust which used to be reposed in them.
As for superannuation “tax concessions”, would it really be fair to tax the income earned over 30 years without regard to the fact that it has to support a person for another 30? If factory owners can claim depreciation for machines, why can’t salary and wage earners spread their incomes forward over their lifetimes?
All true but how do you stop the misinformation being spread by media outlets who sell a lot of advertising space to the ones telling the fairy tales?
ASIC and the ATO know the story for more than 90% of funds being simply a very boring, conservative, long term savings vehicle conducted by people who are careful about the only nest egg they ever expect to have.. However this story doesn’t sell advertising space and doesn’t provide headlines.
Thanks heavens the current government seems to have some grasp of the facts and will likely ignore the noise of the vested interest groups.
Well said Mr Fairweather: this is the result of the rubbish financial advice people received and the poor performance of the public funds. Add to this the fact they they charge people to lose money and it’s no wonder that SMSFs are burgeoning. This criticism has been ongoing since FSRA started and no wonder when we consider that there are (according to reports) 30000 new SMSFs every year. If they start (on average) with a modest $100000 that’s $3 billion coming out from the public funds. Assume that they charge 1% that’s $30 million they are losing in fees. No wonder they are criticising, screaming, complaining to government etc.
Agree get sick of bank flunkies rubbishing SMSF’s for their own revenue/job protection.