SMSF trustees do not value good compliance and are not helped by accountants who sympathise with their view that it is mainly inconvenient red tape, an SMSF lawyer has claimed.
Townsends Lawyers principal Peter Townsend said many trustees have an incorrect view of how their funds are held within an SMSF, but a failure to hold compliant documentation means they may miss out on tax concessions.
Speaking at the Chartered Accountants Australia and New Zealand 2019 National SMSF Conference in Sydney recently, Townsend said documentary compliance was the “entry ticket” to tax concessions and SMSFs need to be compliant, and prove that was the case, to be able to access those concessions.
“Clients don’t value compliance because they have the view that it’s all their money. They hold it in one pocket for use on a daily basis and in another for retirement, and they decide where it goes, so why bother signing pieces of paper when it is all their money at the end of the day,” he said.
“This is not the full story when dealing with SMSFs, but the issue is that accountants often sympathise with that view, which is not a great idea.
“In sympathising with that view, it is easy to end up with a situation where an accountant has blithely helped a client wander into breaches of the SIS Act (Superannuation Industry (Supervision) Act) and regulations.”
He said accountants needed to put SMSF compliance at the top of the list of issues trustees had to understand as everything else would fall away if that was not the case.
“The ATO will allow trustees to put money into an SMSF and allow that fund to be taxed at a concessional rate but the trustees’ side of the deal is to ensure the fund follows the rules and can prove it has done so. It the trustee can’t do that, they have not lived up to their side of the deal and the government can’t deal with the fund accordingly,” he noted.
“Accountants must teach clients to value compliance and that it is not box ticking that can be done at some time, but is a crucial precondition to enjoying available tax concessions.
“You will not be doing clients any favours to sympathise with them about their frustrations around compliance and it would be better to impress on them its importance and what will happen if it is ignored, as well as your expertise in getting it right and the value that provides to them.”
The ATO has indicated that compliance by SMSF trustees is generally at a high level leading one industry participant to label the statistics as an endorsement of the SMSF sector.