Small APRA funds (SAFs) can be an “optimal solution” to an SMSF for some trustees, however lack of awareness is a hindrance to their popularity, according to Australian Executor Trustees (AET).
While most trustees handle the obligations of their SMSF with competence, some are not suited to or are unable to fulfil the role, technical services manager at AET Julie Steed said at the Institute of Chartered Accountants Australia (ICAA) National SMSF conference in Melbourne last week.
“SAFs are an alternative for clients looking for the flexibility of an SMSF… without the burden of being a trustee, the commitment and time involved with administration of the fund or the associated compliance risk,” Ms Steed said.
“The SMSF sector is [known as] the fastest growing sector of the superannuation industry… SAFs are not as prevalent as SMSFs and in many instances this is due to a lack of awareness of their existence and benefits,” she added.
With key reasons cited by trustees for SMSF establishment being control and flexibility, Ms Steed emphasised the investment flexibility and “wide investment menu” SAFs can offer, including property.
“SAFs provide all of the legislative advantages afforded to SMSFs, without the risks associated with being a trustee and of breaching legislative compliance requirements,” she said.
“If a SAF is in breach of superannuation law, any penalty imposed by APRA may be mitigated…[helping] protect arm's length members who were not involved in the decision making that gave rise to the breach of superannuation law,” Ms Steed added.
“Generally, it is difficult to apply this concession to an SMSF due to the mutuality between members and trustees.”
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