Speaking on the back of his speech presented at the Taxpayers Australia book launch of the Ultimate SMSF Trustee’s Guide, McPherson Super Consulting director Stuart Forsyth said there was an excessive focus on ‘problems at the margins’ when SMSF trustees should instead be devoting their attention to the investment within their SMSF.
“I fear that we spend too much time talking about tax and regulatory issues in the sector and not enough time focusing on investing within the SMSF itself,” said Mr Forsyth.
“In the end, SMSFs are about investments – they’re not about tax and regulatory.”
Mr Forsyth said regulation merely “provides the context” while tax is “really about the yield on investments”.
“[The SMSF sector] seems to be in a healthy state and even with areas such as limited recourse borrowing arrangements it’s a relatively small number of funds and compared to total assets under management a relatively small borrowing,” he said.
“Once again there’s a lot of noise about some of these things but when you actually sit down and look at the figures, you see the sector is in pretty good shape – [these marginal issues] take up a lot of time and attention.”
Mr Forsyth said there is also a lot of discussion around tax and wealthy individuals.
“It seems every paper has something about superannuation concessions,” he said.
“Logically you provide tax incentives for people who pay the most tax, the top 10 per cent of tax payers, [and they’re] the ones more likely to take advantage of the tax concessions – it’s not rocket science.”
Mr Forsyth said while he was not trying to belittle the problems of the SMSF sector he said “there are a lot of SMSFs run by people who have developed skills in this area and care about their retirement”.
“The reality is that most trustees take their responsibilities seriously,” he said.
Totally agree with Mr Forsyth.
I try and catch every trustees ear to explain that growth assets have limited use in a SMSF, the name of the game is chasing high income.
It is not only income, but also income which you earn on income over the years (cumulative, due to preservation rules) which gives the desired result in retirement and is important. That is why perhaps negative income or loss from borrowing in super is not such a great idea either inside or outside super. Yet we see a middle aged trustees borrowing and a large number of trustees investing in low yielding assets such as fixed deposits and geared residential property.
Stuart Forsyth is being forthright, and for an ex-ATO executive, refreshingly so. Like worrying about the work canteen and gym, but not about pay, work challenges and outcomes, the SMSF sector is mired in the Australian – indeed human – fixation with not paying tax. The best way to avoid income tax is to avoid all income (not attractive).
But can he now convince the regulator ATO of SMSFs that ignoring investments – as ATO proudly proclaim they do – is irresponsible as well?
Can we teach the ATO: “yes it is not our money, not yet. But till it becomes ours, you the regulator must scrutinise investments, on pain of dereliction”?
Some pro bono lawyer might sue the ATO for regulatory malfeasance.
Has a lot to do with the fact that many SMSFs were set up by Accountants with skills in tax and not investment. ‘When all you have in your tool kit is hammer everything looks like a nail’
One of the best summations I have read in a long time and coming from a former ATO officer was a surprise!