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Accounting, Auditing, Financial Planning

Joint efforts required for SMSF trustee errors

An audit expert has said in order to tackle and reduce SMSF trustee mistakes, accountants and financial advisers must work together when seeing clients.

At the Institute of Public Accountants 2018 National Congress in Sydney today, BDO Australia partner Shirley Schaefer referred to the outcomes of the Australian Securities and Investments Commission’s (ASIC) “Report 576: Member experiences with SMSFs” as a priority area for the profession to keep an eye on.

“This was all around clients’ [level of] understanding when they go into SMSFs,” Schaefer said.

“[The key findings were] 30 per cent of them had no arrangements in place for their fund if something happened to them, 29 per cent wrongly thought they were entitled to compensation for theft and fraud involving the SMSF and 19 per cent didn’t consider their insurance needs when setting up the fund.

“And the most common mistake members are making around insurance is that in an APRA (Australian Prudential Regulation Authority) or retail fund, they’ve probably got default insurance like life, and total and permanent disability cover that comes with their super policy.

“So when they start up an SMSF, they roll out of that APRA or retail fund and forget, so they end up with no insurance.”

But accountants must use caution around speaking about insurance in these circumstances as many would not be licensed to provide insurance advice, she pointed out.

“The more I look at this sort of [poor trustee findings], the more I actually think accountants and advisers need to sit side by side and have the conversations with their clients around these areas,” she said.

The ASIC report also found one in three trustees did not know an SMSF needed an investment strategy.

“The investment strategy issue is potentially getting worse,” Schaefer said.

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