The survey of 300 owners of small to medium-sized businesses found 34 per cent of those who have SMSFs are not entirely across the rules and regulations that apply to their fund.
Speaking to SMSF Adviser, Bentleys WA manager for superannuation services Bradley Raw said he’s also concerned about the amount of trustees he is coming across who are treating SMSFs as a “set and forget” structure.
“We’re finding a lot of trustees see an SMSF as a set and forget. It does take time and knowledge to actually run your SMSF, you can’t leave it and hope that everything will run smoothly,” he said.
Mr Raw also said he’s finding a concerning number of trustees are not necessarily aware of the financial ramifications of non-compliance.
“[Often] they have no idea about the level of power the ATO has,” Mr Raw said.
“When they set up their SMSF they haven’t received appropriate advice or someone hasn’t explained what it means to have a SMSF,” Mr Raw said.
Read more:
Living expenses biggest barrier to boosting super savings, says MLC
FSC warns government against tampering with super
I agree with wondering. There are many things that people enter into without necessarily understanding all the detail behind it. One example is if they become a landlord – they don’t know all the rules relating to their legal obligations, and entrust real estates to manage the tenancy on their behalf. I have sat with clients, explained the rules and regulations, compliance obligations, and the importance of their roles and responsibilities and gotten their sign off that they understood them. I don’t think that means that they are going to go home and study them. I think the way they see it is that they are entrusting the adviser to assist them fulfil their obligations in the same way the property owner is entrusting the real estate. I am not convinced that the trustees being able to prove their knowledge when questioned should be a determining factor in whether they have the ability to run a fund, as it is possible (common)to pay for advice in regards to this.
When you first get your learners permit to drive a car you do not know all the road rules but if you know a few they will let you drive under supervision, gradually working your way up to driving on your own as you know more rules but not all of the rules.
So why should a SMSF not be the same? New trustees get asked a few questions by the ATO & with the assistance of advisers trustees head of on their learning experience. It is just that an adviser is generally with the trustee for life so perhaps the level of understanding on all SIS laws is not necessary as long as the advisers are competent. Perhaps there lies the problem.
I agree with your comments Bradley. The main issue is that many SMSFs established are arranged by financial advisers and accountants where the trustees have minimal involvement in the set up except for initial meetings and signing of forms. It is far too easy to set up a SMSF these days! SMSFs can be established quickly with the automation of the establishment process, there is no major emphasis on understanding SIS rules and the importance of trustee roles and responsibilities. Advisers play an important role in the industry and need to spend more time with new trustees ensuring they fully understand the rules and what they have signed up to. The regulator is doing a great job contacting trustees of new funds and I understand some trustees have subsequently closed funds after fully being informed of their roles and what it means to have a SMSF. As professionals we all play a role ensuring the integrity of the SMSF industry.
I’m surprised the number is so low. I imagine the criteria “entirely across the rules and regulations that apply to their fund,” must be a pretty broad descriptor.
In my experience it would be at least 1/3 that have absolutely no idea and somewhere between 1/2 and 2/3 that are generally across what their obligations are.