Stricter controls needed on SMSFs with low account balances

The superannuation fund for the real estate industry, REI Super, has called for stricter controls on the establishment of self-managed superannuation funds (SMSFs) with small account balances in response to the Productivity Commission’s draft report which found that those SMSFs performed worse than Australian Prudential Regulation Authority (APRA) regulated funds.

REI Super argued that new rules were needed to make it harder for people with under $200,000 in their super to set up an SMSF.

Also, the fund said that the Royal Commission into the Banking and Financial Services Industry found that financial advisers were often pushing people with small superannuation balances into SMSFs, without considering whether or not it was in their best interest.

According to REI Super chief executive, Mal Smith, the data from the Australian Tax Office (ATO) showed that around one in five SMSFs had account balances of $200,000 or under.

VIEW ALL

View all

“The data is clear and shows that you need an average of $2 million in your SMSF until you start to match the returns of APRA regulated funds,” he said.

“One member with an account balance of $100,000 was advised to go into an SMSF by her accountant. Another member was given bad advice and set up an SMSF with her husband with a combined balance of $300,000.”

According to Smith, it shouldn’t be as easy as it was to set up an SMSF when good returns on low balances were on average not achieved.

“Changes to SMSF rules would help prevent financial advisers from encouraging people into an SMSF when it is not in their best interest,” he said.