Trustees lack knowledge about their SMSFs: ATO

Speaking to delegates at the IPA National Congress on November 8, Mr. Bambrick said that while the ATO thinks the SMSF sector is in “pretty good shape overall”, there’s still a few outstanding issues of concern.

“We worry that trustees or SMSF professionals fail to understand their obligations. We worry about trustees that don’t comply with their obligations, such as lodging their annual return. We worry about approved SMSF auditors who don’t audit funds properly or don’t report contributions to us. We worry about SMSFs being established for early release or money accessed early before the condition is met, or the SMSF being used for tax avoidance.

“We think the majority of people meet their obligations and won’t ever hear from us. So, we are concentrating on those who don’t comply, whether deliberately or in error,” Mr. Bambrick said.

Regulators such as the Australian Securities and Investment Commission (ASIC) have also issued warnings about the quality of advice consumers are receiving in relation to investing in residential property using a SMSF. ASIC has witnessed advertisements stating that consumers can use their superannuation to purchase a property using the National Rental Affordability Scheme (NRAS) and receive “$100,000 tax free”.

According to ASIC, these ads do not detail the features, benefits and risks of investing in a NRAS using a SMSF.

“Consumers need to be cautious when presented with claims which appear too good to be true and should do their research before investing. Consumers should think carefully about how long they intend to hold the NRAS property, ensure that they understand the income and capital potential of an NRAS property and satisfy themselves that it fits with their investment purpose,” ASIC Commissioner Greg Tanzer said.

ASIC recommends that if you wish to make an investment through your SMSF, do your homework. The regulator says to check that the person you wish to deal with is licensed to provide financial product advice by searching ASIC’s public register of Australian Financial Services Licensees (AFSL) or authorised representatives using ASIC’s Connect Online.

Mr. Bambrick said that in addition to receiving advice from their (licensed) SMSF adviser, they need to educate themselves through research and courses.

“We do find a worrying number of trustees that have little to no idea about their obligations and who wrongly aggregate all of their responsibilities to their tax agent or adviser.

“I want to emphasise that no matter the quality of their adviser or tax agent, trustees need to recognise that they themselves are accountable for their funds.

“We all need to work together to ensure the superannuation sector’s integrity,” Mr. Bambrick said.