ASIC and the ATO are cracking down on SMSF services that are advertised as ‘free’ but end up locking trustees into long-term contracts.
Speaking at the Financial Advice in Super Symposium in Melbourne on Friday, ATO director of SMSF regulatory and income tax products Nathan Burgess warned against the proliferation of such services on the internet.
“ASIC are looking to a few people who have advertised [an SMSF service] as free, but when [the trustee] books in to it they are signing up for long-term service contract that is going to cost them a lot of money,” said Mr Burgess.
“It’s a challenge, because people might actually sign up without actually putting the thought through.”
The ATO is also set to become much more proactive in its monitoring of the SMSF sector, said Mr Burgess – including the online space.
“We’re paying a lot more attention to seminars, conferences, even what people are posting in bulletin boards [on the internet],” he said.
“We've noticed in those forums that while most people get it right, sometimes there's misinformation and we're starting to think we should play a role in there.”
These comments follow a warning from the SMSF Professionals' Association of Australia (SPAA) to trustees about free SMSF establishment services.
“It may be linked to an SMSF borrowing or may be used as a ‘catch’ for a more expensive ongoing service that locks you in,” said SPAA's Graeme Colley.
“Although establishing the SMSF may be free, the ongoing costs may be higher than what is available elsewhere in the market. Remember, too, some of these ongoing services may be available on a user-pays system,” he said.
“[Trustees] also need to consider the extent of the service, flexibility and depth of what is being provided as well as comparing the overall cost of administering the fund, and not just the cost of setting it up.”
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