ASIC removes minimum threshold from SMSF guidance

The Australian Securities and Investments Commission (ASIC) has decided to remove a $500,000 as an indicator of the ‘appropriateness of advice’ to establish a self-managed superannuation fund.

In updated guidance to SMSF advice, the regulator opted to no longer nominate a minimum threshold.

It did point out that fund expenses were proportionally higher for an SMSF and net returns were lower for low-balance funds.

SMSF Association deputy chief executive and director of policy & education, Peter Burgess, said the move was a “significant breakthrough” and followed research by the University of Adelaide that there was no material difference in performance for SMSFs between $200,000 and $500,000.

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He said: “In particular, references in ASIC INFO 206 to SMSFs with balances below $500,000 as having lower investment returns and will often be uncompetitive compared with APRA-regulated funds was at odds with the findings of the University of Adelaide research conducted on a sizeable proportion of the SMSF sector.

“It’s worth repeating that the University of Adelaide research found no material differences in performance patterns for SMSFs between $200,000 and $500,000, so the notion that smaller SMSFs in this range deliver materially lower investment, on average, than larger SMSFs in this range is not supported by the research. The research shows that a more appropriate threshold is $200,000.

“So, it’s extremely pleasing that the regulator has taken heed of this research and our representations on this issue and has removed references to the $500,000 threshold.”

However, he noted SMSFs which were less than $200,000 were likely to achieve considerably lower net investment returns than those with a higher volume of assets.

Burgess also welcomed ASIC’s comments about the need for advisers to have specialist knowledge about SMSFs.