Advisers and accountants should examine whether their SMSF clients are suitable for investment vehicles outside of the retirement savings system in light of the superannuation reforms, according to the director of a major accounting firm.
PwC private clients director Liz Westover said these conversations are vital as the super reforms implemented from 1 July 2017 has changed the nature of the tax advantages that are available to SMSF trustees. “We’ve really got to start looking at other investment vehicles that might either take over from an SMSF or super or might compliment what you’re actually doing with your SMSF,” Westover told trustees at the SMSF Association’s inaugural SMSF Expo in Melbourne over the weekend. Westover highlighted some of the restrictions that have come into being under the super reforms such as the operation of the transfer balance cap rules dictating some monies paid out under a death benefit may actually have to be exited from the superannuation environment. Outside of the super reforms, Westover warned SMSFs came with other restrictions including those relating to acquiring real property as well as related party transactions associated with these assets. “The thing you’ve got to remember about SMSFs is that there’re very few restrictions in what you can invest in but as soon as you start transacting in anyway with a related party, be that buying an asset from, selling to, leasing to, or any kind of interaction with related parties, it starts getting a lot more restrictive,” Westover said. She used the example of the inability to lease an SMSF residential property to the fund member’s children as one of these restrictions. “If you want flexibility around those investments, maybe an SMSF isn’t the right structure for you to use,” Westover warned. The issue of mental incapacity was another issue advisers needed to address with regard to the suitability of an SMSF for clients as opposed to them becoming a member of an Australian Prudential Regulation Authority-regulated fund. “I don’t pretend to be an expert on every facet of every vehicle that’s around. But what I do know when I’m talking to my clients is sometimes I just know I’ve got to engage with them on some of these other vehicles and I know to ask more questions about what they want to do,” Westover said.