Editorials

Brickbats validate SMSF success

When I began publishing selfmanagedsuper Trustee News, one of the missions I set myself was to cut through the unhelpful noise reverberating around the industry about the SMSF sector.

And in recent weeks hasn’t there been a cacophony of complaints about SMSFs, ranging from their ability to use franking credits to the detriment of Australians who don’t have an SMSF to the tax-free status of income when SMSF members are in the pension or retirement phase of their lives.

Of course there is nothing new here and, as usual, no factual evidence to validate any of the accusations.

The fact of the matter is every Australian investor has the ability to make the most out of the dividend imputation system currently in operation, not just SMSF members. Ironically this includes larger super funds – the very institutions usually behind the SMSF bashing in question.

Furthermore, the tax-free status of income when individuals reach retirement age is a benefit all superannuants can take advantage of.

No doubt a lot of you are thinking this is pretty boring stuff you’ve all seen before, but there have been a few differences this time around.

Firstly, when the latest stories criticising the sector in the mainstream media were published, other sections of the media called the authors out saying these continual misguided attacks on SMSFs had to stop.

In addition, the SMSF Association, that for years had avoided going head-to-head with critics of the sector, actually wrote a letter to the editor of The Australian Financial Review refuting the myths thrown up to justify the denigration of the sector it represents.

These reactions, which really haven’t been witnessed before, perhaps indicate a lot of people are drawing a line in the sand and saying enough is enough with regard to the condemnation of SMSFs.

On a more positive note though, this latest round of SMSF bashing reinforces how many goals these funds and their trustees are kicking.

Without doubt SMSFs are achieving the wealth management objectives of trustees and have successfully dealt with many of the hurdles some critics considered insurmountable for most individuals.

The returns generated have been comparable or slightly better than their Australian Prudential Regulation Authority-regulated counterparts, particularly during the difficult times of the global financial crisis.

Effective cost control has also been achieved, evidenced by the dramatic reduction of the minimum balance most industry experts would consider appropriate at the time of fund establishment.

Let’s face it, no rivals hurl serious brickbats at competitors that are not performing well.

But perhaps the one characteristic shining through as a result of these attacks is the level of transparency SMSFs have achieved.

Part of the ignorance surrounding the franking credit debate is that individuals cannot see how they are used within the larger superannuation funds. But franking credit use, along with elements such as gearing strategies, are there for everyone examining the SMSF sector to see.

Achieving and maintaining this level of transparency, although being something used to fuel criticism of the sector, can only be viewed as a good thing.

But while a positive outcome can be extracted from these SMSF attacks, the better result would be for them to stop so the way could be opened for some sensible, rational debate about improving the sector.

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