In a submission to the Financial System Inquiry (FSI), ASIC acknowledged there are situations in which establishing a low-balance SMSF may be in the best interest of its members.
However, ASIC said there is potentially merit in introducing either a “soft” minimum balance or some further guidance on what an appropriate minimum balance for an SMSF would be.
“This may mean, for example, that a minimum balance applies unless certain requirements are satisfied. An alternative is to provide guidance on an appropriate minimum balance for SMSFs, which could be strengthened by applying an ‘if not, why not’ disclosure requirement,” ASIC stated.
“That is, if the accountant or adviser recommends an SMSF for a client below, for example, $100,000, then the accountant or adviser would need to explain why it is appropriate to recommend an SMSF to a client with a low balance.”
The minimum balance required to adequately cover the cost of operating an SMSF has been reduced from previous estimates, ASIC noted.
There may also be merit in considering what better information could be provided to potential SMSF members about the cost-effectiveness of SMSFs, ASIC said.
ASIC also reiterated it remains concerned about issues related to SMSFs and leveraging, and is keeping a “close eye” on ensuring that services provided in relation to SMSFs do not subject trustees to risks they are unprepared for.
I cannot see any Adviser and after 2016 any licensed accountant recommending to set up a SMSF with $100.000. What we do see is clients who want to set them up for that amount and despite warnings on costs they ask to proceed as they are willing to accept those costs for a specific personal reason. So I have no problem with not being able to recommend a SMSF for those small balances but do we abandon those who decide to proceed for their own reasons. My preference is to continue to educate them and guide them to ensure they make it viable as soon as possible.
By the way I found that by educating clients and using tools like http://www.smsftrustee.com that many see the sense in being patient and building a larger balance before commmitting to a SMSf but some are determined!