Super traps for novices

More than one million Australians have turned their backs on established superannuation funds and set up self-managed funds.

The fastest-growing sector of national savings has almost doubled in five years to be worth $575 billion, but regulators and advisers warn that SMSFs are dicing with danger.

More than 2500 self-managed super funds are being set up each month and SMSF association managing director Andrea Slattery said the growth rate was steady.

While the SMSF sector is forecast to more than treble in size to $2.3 trillion in less than 20 years, even its peak body warns against rushing into setting up your own fund.

“SMSFs are not for everybody,” Ms Slattery said.

“The most important question you need to understand is do they meet your personal, business, financial and family needs.”

Thousands of errors are made each year by people who avoid or ignore advice from SMSF advisers, accountants, auditors and investment specialists.

Penalties can range from $3200 fines for failing to have a written investment strategy to having all of your fund’s income and capital gains taxed at 47 percent if a fund breaks any of the many rules.

Wealth For Life Financial Planning principal Rex Whitford said some people followed the SMSF path because of peer group pressure or “sometimes they have had a bad experience and are justifiably jaded”.

However, a knee-jerk approach to being your own super fund trustee and failing to seek professional help could be costly and full of painful paperwork, he said. “It’s like self-managed heart surgery or brain surgery – it’s all good until you get a bleeder, and then you might need some help,” Mr Whitford said.

Regulators the Australian Taxation Office and the Australian Securities and Investments Commission told the SMSF Association national conference this week that they were keeping a close eye on self-managed funds.


Anthony Keane
The Courier Mail February 20 2016

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