Advisers Face Risks Over SMSFs

According to a specialist lawyer, clients need to be advised by their financial advisers about setting up their self managed super funds. If financial advisers do not do this, they may be charged with professional negligence.

Peter Townsend from Townsends Business and Corporate Lawyers said advisers should allow their clients to use an individual trustee. According to the Australian Tax Office, only a quarter of all SMSF funds had corporate trustee.

According to Townsend, in 2011, about 90 percent of newly registered superannuation funds were set up with individual trustees.

He added that in the last three years, there was about 1.5 percent decline in SMSFs established with a corporate trustee. Towsend said industry analysts should take note of the gradual shift to individual trustees.

Townsend said that appointing a corporate trustee can be more cost-effective. It can also avoid other expenses like transfer costs of assets on the change of an individual trustee, and would provide effective separation of assets.

He said that when one saves money because of not having a corporate trustee, it is only synonymous to create a false economy.

Under the Superannuation Industry Supervision Act, trustees must separate assets of a fund from their personal assets.

It can, however, be difficult to keep track of personal assets and keep these separate from fund assets. A corporate trustee would help address this problem and avoid serious repercussions.

Having corporate trustees would also avoid accidental fund vesting when one of the two members passed away.