Law firm hits out at ASIC over SMSF advice

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A law firm has criticised self-managed super fund (SMSF) guidance issued by the Australian Securities & Investment Commission (ASIC).

ASIC last week issued two fact sheets for SMSF advisers which contained a number of compliance tips around the areas of the SMSF industry ASIC is likely to investigate.

One concern ASIC expressed in the information sheets was whether or not a SMSF fund was in the best interests of an individual, with the watchdog indicating it believes SMSFs should only be opened if they have a starting balance of $200,000 or more.

ASIC believes the costs of establishing and operating an SMSF with a balance of $200,000 or below are unlikely to be competitive, compared to a regular super fund .

But Sydney based law firm, Townsends Business & Corporate Lawyers have described that as “completely incorrect, arbitrary and deeply ill-informed.”

In a statement on their website, the law firm claims there are a number of reasons why the idea of a minimum balance of $200,000 is unnecessary, such as investment strategies and the ability to control the fund.

“Given the current very strict rules about how much money you can contribute to super, there are certain strategies that are not available via public offer funds that can give a massive boost to long-term retirement income such as LRBAs (limited recourse borrowing arrangements) to buy direct shares and property, even where the starting balance is well under under $200,000 since that is just the deposit,” the statement read

“Only via a SMSF can the client take advantage of certain strategies that are not practically available via a public offer fund, such as the ability to jointly invest in an asset portfolio with a related party … the starting balance again is not relevant.

“ASIC’s focus on short terms costs is simply naïve – it effectively says it is better to pay 2% fees in a public offer fund that yields a 5% return in the long run compared to say 7% fees in a SMSF that yields 20% returns over the same period.”
 

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