The SMSF sector has had to respond to an ever-changing regulatory state over the years – and more changes are to come. The shifting landscape has led some trustees to breach regulations unwittingly. This dynamic was the impetus for the session titled SMSF myth busting, which was led by Kate Anderson, IOOF national manager, technical services.
The discussion helped advisers set the record straight on common misconceptions in the industry.
One area explored in the session was investment strategies. A common misunderstanding is that only a single strategy is necessary to meet the needs of members who are spouses.
Although spouses generally form one economic unit, each person may have different objectives and levels of risk tolerance. For example, preservation rules could mean different investment timeframes and different liquidity needs.
Tax rules related to investment earnings and minimum pension requirements make it appropriate for accumulation accounts and pension accounts to have different investment strategies. It’s important to consider the needs of each member and create an investment strategy that caters to their different needs and attitudes.
Myths around SMSF-specific investments were also covered in the session. The first question to be asked when acquiring an asset for a fund is from whom the asset is being purchased. SMSF trustees are generally prohibited from acquiring assets from parties related to the SMSF, pursuant to Section 66 of the Superannuation Industry Supervision Act. However, there are several exceptions to the rule that advisers need to understand.
Common compliance breaches were also covered, including provision of loans or other financial assistance to members or relatives, which is prohibited.
It’s essential for SMSF experts to understand these limitations so they can provide the right advice to clients.