Setting up an SMSF is about to come with a few more hurdles

The Federal Government has announced new measures aimed at tightening the rules around establishing SMSFs, with a greater focus on trustee education, investment strategy and oversight. While stronger safeguards are welcome, the key question is whether these changes protect consumers without making SMSFs unnecessarily difficult for ordinary Australians to access.

What’s changing and why?

The Government says the reforms are aimed at reducing losses caused by poor advice, fraud, conflicted sales practices and high-risk investments flowing through parts of the super system. Recent failures such as Shield and First Guardian have sharpened that focus, while ASIC’s review of SMSF establishment advice also found serious shortcomings in a portion of the files it examined.

For new SMSFs, the proposed changes include:

• basic trustee education requirements before taking control of an SMSF

• uniquely identifiable SMSF bank accounts

• stronger ATO and ASIC data sharing

• new ATO powers to stop a rollover into an SMSF where there is a well-founded concern about consumer harm

• changes to the SMSF supervisory levy, including bringing the first levy closer to establishment and increasing the amount.

After 20 years working exclusively with SMSFs, I’ve seen very good outcomes where the fund is appropriate, properly structured and the trustees understand their responsibilities.

The intention is consumer protection. The challenge will be making sure the rules target bad advice and bad operators, reforms should target the true causes of consumer harm without unnecessarily restricting consumer choice and creating unnecessary barriers for people who are well suited to an SMSF and understand the responsibilities that come with it.