Ideology, self-interest driving SMSF criticism: SMSFOA

The executive director of the SMSF Owners’ Alliance has hit out at critics of SMSF tax concessions and limited recourse borrowing arrangements, saying their claims are often driven by self-interest and “are just plain wrong”.

Speaking to SMSF Adviser, the SMSFOA’s Duncan Fairweather said the success of the SMSF sector “breeds envy and draws criticism” from industry counterparts.

“You'll hear it said that self-managed funds are driving up property values, distorting capital allocation, investing too conservatively, investing recklessly, straining the budget, getting an unfair tax advantage and are costly to run,” Mr Fairweather said.

“We challenge each of these claims as they are often driven by ideology, or self-interest or are just plain wrong.”

Mr Fairweather said despite claims that SMSFs are used to gain an unfair tax advantage, members of SMSFs are subject to the same tax rules as members of managed funds.

“Critics are quick to point out the top 20 per cent of income earners get the lion's share of super tax concessions but they don't always acknowledge that the top 20 per cent also pay the lion's share of income tax,” Mr Fairweather said.

“They get 57 per cent of the tax concession but pay 64 per cent of income tax. So, as you would expect, the value of their super tax break is proportionate to the amount of tax they pay, and actually a bit lower.”

Commenting on claims that SMSFs are costly to run, Mr Fairweather said for SMSFs with balances above $100,000, costs are comparable or lower to the costs of a managed fund.

“The real cost issue in superannuation is the fees charged by the large industry and retail funds which are estimated to have consumed a quarter of these funds' returns in the past decade, a cost borne by their members.”

There is also “no hard eveidence” to back up the claim that SMSFs are driving up property prices, Mr Fairweather said, with low interest rates and a supply issue being a more likely driver.

“The real cost issue in superannuation is the fees charged by the large industry and retail funds which are estimated to have consumed a quarter of these funds' returns in the past decade, a cost borne by their members.”

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