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More attention needed on investments

The SMSF sector was currently putting too much emphasis on legislative and compliance issues and needed to increase the attention given to the investments of funds, according to a former ATO official.

“We tend to spend a lot of time talking about tax and regulation, but if you think about what an SMSF is, it’s an investment vehicle,” McPherson Super Consulting director and former ATO superannuation assistant deputy commissioner Stuart Forsyth said.

“The investment performance of your fund is what ultimately will have the biggest influence on your retirement benefits unless you do something really stupid like getting the fund made non-complying.

“That’s the critical factor. I think people need to spend more time on the investments side than they do and have more focus on it than they currently do.”

Forsyth expressed surprise at the lack of sophistication reflected in some existing SMSF investment strategies, citing one case where a trustee had $15 million of SMSF assets all invested in managed funds through a single service provider, which had led to suboptimal outcomes. “[This individual] refuses to start a pension, even though he’s over 60, because that would mean he would have to take money out of super when he’s concentrating on getting money in,” he said.

“So he’s paying more tax than he needs to.”

He said in many instances SMSFs displayed an absence of proper planning, resulting in poor financial management outcomes for members. “[I’ve seen] people who should have started a pension when money was rolled into the fund and four years later they still haven’t started a pension,” he said.

“A lot of their money might be untaxed, but some of their money is now taxed because of the earnings over those four years.

“And you don’t know if they’ve got advice and ignored it, but what you do know is there are consequences for those people in what has actually been done.”

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