Investments, Strategy

Trustees acting on imputation ban

Some SMSFs think ban on imputation credits already applies.

Some SMSFs have assumed the Labor Party’s policy on banning excess imputation credit funds is already legislation, highlighting the need for advisers to ensure their clients understand the latest announcements affecting super.

“A lot of people thought simply because it was announced in the paper that somehow it had happened already, that it was in the law and was going to impact upon their portfolio or business already,” SMSF Association head of technical Peter Hogan told the recent selfmanagedsuper 2018 SMSF Roundtable in Sydney.

“So that’s obviously a clear message to get out to them via advisers that that is not the case.”

Commenting on the extent of the actions advisers should be taking with clients, Hogan said the answer was dependent on the client as to whether they wanted to take action or not.

“Some of them think that the market’s already moving, perhaps to the detriment of their portfolio, or it feels time for them to move their portfolio around already because there’s further impact on their portfolio,” he noted.

“Others are happy to sit and wait and just sort of wait to see what happens first.”

He added how the wealth industry responds to the proposed imputation ban will be interesting.

“There are a lot of asset classes that SMSFs, being direct investors, find it very difficult to invest in and the difficulty has always been trying to find a vehicle at a retail level, if you like, that will allow trustees of SMSFs to invest into markets they’re comfortable in, even international shares, directly,” he said.

“That’s still possible, but in some instances it’s expensive or perhaps they don’t quite understand the process.

“More brokers now are offering direct investment into international stock markets at reasonable prices and that needs to continue on.”

He referred to research from the United Kingdom that found when UK stockbrokers started to offer United States-listed stocks and European-listed stocks for the same brokerage costs as buying UK stocks, investors began buying them.

“When they were trying to charge three times the brokerage fee, people weren’t interested,” he said.

“So if the [Australian] wealth industry starts moving to respond to what SMSFs like to do, which is to be a direct investor, perhaps a larger take-up in exchange-traded funds is a way of getting exposure to indexes other than the Australian share market around the world and so forth,” he noted.

“Property trusts have their function, but have inherent problems with them as well for investors, from time to time, so it’s about trying to find new ways [of accessing non-franking credit opportunities].”

The excess imputation credit ban was a key topic at the SMSF Roundtable, featured in the latest issue of selfmanagedsuper magazine.

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