The majority of SMSF trustees rely too much on tax professionals in order to meet their obligations as trustees.
The majority of SMSF trustees rely too much on tax
professionals in order to meet their obligations as trustees.
Trustees of self-managed super funds differ greatly in
their understanding of their roles, with many depend too heavily on
professional advisors to fill the gaps, according to ATO-commissioned research.
The study identified distinct groups of SMSF trustees,
revealing an array of different levels of understanding, confidence and
involvement.
Read more: The SMSF Auditor's Role in Self-Managed Superannuation Funds
"There are some who are extremely confident and
financially knowledgeable, are interested in finance and investing and are
regularly attending webinars and seminars.
"Then on the opposite end there are trustees that
aren't prepared who are not confident in their finances and capacity to
effectively manage their SMSF. They are often quick and ad-hoc in their
decisions, and are price sensitive and hesitant to take the financial guidance
of."
Mr Micale stated that the trustees who were not
prepared comprising 13 percent of respondents, were also more likely to be
relying on sources of information that are not official like social media and
friends.
"Interestingly, one-third of those in the
unprepared group advised us that they regretted their decision to start their
SMSF," the researcher said.
Another group, which is referred to as trusting
delegations, had professional advice but put their total confidence in an
individual Micale, he said. Micale.
"[This could be] at times to their disadvantage. Trustees
are able to manage the affairs of their SMSF without conducting any
investigation on their own, which leaves themselves open to being the victim of
fraud," he warned.
The study was conducted by an independent researcher
and included the form of online survey, mystery shops conducted by SMSF
experts, in-depth discussions with professionals and trustees and discussions
in groups.
The study found that more than three-quarters of
trustees do not have the financial capacity and confidence for managing an SMSF
and place their total confidence in their advisor He said.
"For those who do not have the benefit of sound
advice, this often results in non-compliance and puts their retirement savings
at risk," Mr. Micale.
"For professional professionals, it could
indicate that they face an even more difficult client to assist. It is
definitely in the best interest of professionals like ATO as well as SMSF
professionals to take action to address this problem."
Another issue according to Mr Micale was how the vast
majority of trustees have left their compliance duties entirely to their SMSF Audit experts.
"While a trustee can appoint a professional to
help them, the final responsibility and accountability lies with the
trustee," he added.
But, he added that the positive impact of SMSF experts
on the compliance behavior of trustees has resulted in a better result for the
client.
"What the report really underlined was the critical
and significant role that experts play in assisting trustees in running their
SMSFs efficiently and meeting their regulatory requirements," he said.
"While the ATO is regarded as a reliable source
of information, trustees said they are more likely to seek advice and
information from their accountant or SMSF practitioner."
Mr Micale stated that it is important that potential
trustees enter into the scheme with eyes and have a clear awareness of their
responsibilities and obligations prior to committing for an SMSF.
"Another interesting revelation from the research
is that trustees develop habits in the first six months of operating their
fund, so there's a real critical window for early engagement with trustees
during this period," He said.
He also advised SMSF professionals of the recent
publication released by the ATO to aid trustees who are new or aspiring to
become trustees. The publication is titled Beginning the process of
establishing an SMSF.
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