Small APRA funds undervalued, practitioners told
Small APRA funds are under-utilised by practitioners as an alternative to SMSFs for clients that are facing bankruptcy or relationship breakdown issues, according to one industry consultant.
Many of the investments or assets that can be held in an SMSF can also be held in a small APRA fund, Miller Super Solutions founder Tim Miller said at the SMSF Association conference.
“The small APRA fund is to me one of the most undervalued parts of this industry,” said Mr Miller.
While it is slightly more expensive to run a small APRA fund compared with an SMSF, Mr Miller said the fees are less prohibitive for funds with $500,000 and can be a good alternative to SMSFs for certain clients.
“I went through the list of APRA-regulated funds which also lists the small APRA funds and who the trustee is of those funds, and a lot of the names I recognise from historical administration when I dealt with these people that had bankruptcy issues, living overseas issues and relationship issues,” he said.
“The small APRA environment offered them a choice, and it still gives them that control.”
Small APRA funds, he said, are a particularly useful mechanism for trustees who have become disqualified due to bankruptcy, he explained.
“Bankruptcy and SMSFs are a very difficult situation to deal with. You’ve got basically two choices: get a small APRA fund or get rid of the SMSF fund completely,” he said.
A small APRA fund may enable a disqualified trustee may to regain control of their fund again at a later point, he said, once they are discharged from bankruptcy by asking the small APRA fund trustee to resign and asking to be reappointed as trustee.
The trustee will lose control of their fund while they are bankrupt but it does mean the trustee can keep their SMSF and assets such as real business property that sit within the fund, he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.