SMSF Association managing director Andrea Slattery says self-managed super funds are growing steadily.
MORE than one million Australians have turned their backs on established superannuation funds and have set up self-managed accounts.
The fastest-growing sector of national savings has almost doubled in five years to be worth $575 billion. There are now more than one million SMSFs, but regulators and advisers warn that those who truly try to DIY are dicing with danger.
Many have no experience in investing and the administration required, but still prefer to go it alone ignoring a large SMSF support sector available to them.
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 is 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.
“There’s a process that you have to go through to set one up and you have to interact with professionals and be engaged.”
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 $3200 fines for failing to have a written investment strategy to having all of your fund’s income and capital gains taxed at 47 per cent 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 kneejerk 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 in Adelaide this week that they were keeping a close eye on self-managed funds.
“At the end of December 2015 we undertook integrity checks of 2200 newly-registered self-managed super funds, and we excluded some 300 trustees from the system and imposed operating restrictions on a further 800 new SMSFs,” Tax Commissioner Chris Jordan said.
ASIC Commissioner Greg Tanzer told the conference: “When people are deciding to have an SMSF, understand that it’s a weighty responsibility”.
ATO assistant commissioner for superannuation Kasey MacFarlane said some SMSF trustees voluntary asked the ATO to cancel their fund’s registration after realising it was not like a personal bank account that they could dip into.
“We have seen examples where things go terribly wrong, particularly in cases where people have been approached by property spruikers to set up an SMSF for the purpose of investing in property,” she said.
David Itzkovits, the US-based head of investments at Sanlam Global Investment Solutions, told the conference that investors who tried to go it alone were often negatively affected by overconfidence, overtrading and a natural fear of losing money that was three times stronger than the joy of making money.
“We like to think investing is divorced from emotions but that’s not the case,” he said.
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