In its response to the Financial System Inquiry interim report, ASFA said while it did not support any “specific limitations” on the establishment of SMSFs, the ATO should play a role in providing more information on average and likely costs to those applying to set up an SMSF, describing these desired communications as "health warnings".
ASFA argued that prospective trustees should be required to “indicate the amount of funds intended to be used at the time of establishment of the SMSF or in a reasonable period thereafter”.
The association noted that based on data from 2012, SMSFs with $50,000 or less in assets had an average operating expense ratio of 9.5 per cent, with the ratio falling to one per cent for SMSFs with more than $500,000.
“As can be expected, the estimated operating expense ratio for SMSFs declines in direct proportion to the increased size of the fund,” it argued in the response.
ASFA also suggested the ATO provide more information about trustee duties and legal obligations and ask prospective trustees questions on a targeted basis.
“While there should not be a requirement to demonstrate competence as a trustee, such questions would at the very least identify for prospective trustees issues and matters they should be aware of to successfully operate an SMSF,” said ASFA.
ASFA also acknowledged its support for the removal of the accountant’s exemption leading to increased obligations for accountants regarding what advice they can provide and the circumstances in which they can provide it.
It noted, however, that following the changes in licensing, it will not be required for accountants to consider whether the client is better off moving from an existing superannuation product to an SMSF.
ASFA also argued that the “transition period for obtaining a license is too long and, in the interests of consumers, should be reduced to 12 months from when the provisions were changed”.
Any policy concern, ASFA argued, should be about whether an “informed choice is being made by those establishing SMSFs and that SMSF trustees continue to assess the cost efficiency of their decisions”.
“In this context, there is a need for appropriate licensing and enforcing of required behaviours for all advisers advising on or promoting SMSFs, including individuals and firms promoting setting up an SMSF in order to purchase a residential investment property,” said ASFA.