SMSFs: Watch out for cold callers, one-stop shops and early-release schemes
Unfortunately, self-managed super funds can make an attractive target for operators using questionable and sometimes clearly illegal methods to try to get a slice of our retirement money.
The latest statistics from the Australian Prudential Regulation Authority (APRA) show that the average SMSF held assets of $1.02 million at the end of September. And the fact that the funds can borrow to invest using limited recourse loans can make them an even more attractive target.
In short, SMSF trustees have to deal not only with the usual challenges of saving, investing and abiding by superannuation laws, but also with keeping these unscrupulous operators at bay.
Three of the arrangements that ASIC's SMSF taskforce and the tax office, as regulator of self-managed super, are warning SMSFs and large APRA-regulated fund members of are:
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Unsolicited phone calls or cold calls urging the establishment of an SMSF to buy an investment property or some other investment. This may involve encouraging a member of a large super fund to transfer their savings into a new SMSF to buy the investment being pushed.
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One-stop shops offering a range of financial "services" - often SMSF establishment, investment advice, tax advice and property sales - from the one organisation.
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Illegal schemes designed to convince super fund members to gain early access to their super savings before reaching their preservation age. These schemes, which usually charge high commissions, commonly involve urging members of large super funds to rollover their super into a new SMSF before taking the savings out of the super system in contravention of the law.
Among the factors that cold callers and one-stop shops often have in common is a determination to sell an investment and to sell that investment to an SMSF.
As part of this surveillance program, ASIC is focusing closely on property spruikers without an Australian Financial Services Licence (AFSL) advising SMSFs to buy properties. It is illegal to provide investment advice without a licence. (See SMSF borrowing: Beyond the latest headlines, Smart Investing, October 25.)
And the tax office warns that cold callers often entice individuals to establish an SMSF to buy an investment, including a direct property, without regard to whether an SMSF is appropriate for their circumstances.
Saving enough for an adequate standard of living in retirement is already challenging without operators of questionable and illegal schemes making it even tougher.
Written by Robin Bowerman, Principal, Market Strategy and Communications at Vanguard Australia.
Reproduced with permission of Vanguard Investments Australia Ltd
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