A mid-tier accounting firm is witnessing an increasing number of SMSFs being established to play a more strategic and specific role in client wealth building and retirement activities.
“From our client base we’re seeing less and less people setting up funds in order to do everything themselves, like buying equities. More so they are setting up SMSFs to purchase a business property to lease it out to themselves, as well as residential and other commercial [properties],” HLB Mann Judd superannuation director Andrew Yee said.
Many of HLB Mann Judd’s clients are satisfied members of either a retail or industry fund and as such are unwilling to change their situation completely by rolling all of their retirement savings into an SMSF, Yee noted.
He shared the firm’s recent experience with one client as an illustration of the strategic use of SMSFs to which he is referring.
“One client said: ‘I’ll move a certain portion of [my superannuation] money into a self-managed super fund because I want to buy a property, but I’ll leave the other half in my industry fund because it’s generating 10 to 12 per cent returns, which I can’t do myself,’” he said.
“That’s what we are seeing from clients, which is understandable because a lot of these clients are too busy [to look after the investments] unless they get proper advice, so they are happy to leave [a portion of their super] in their retail or industry fund.”
He identified an issue individuals using SMSFs for these purposes might encounter given the current regulatory climate.
“The problem with having too much property in your self-managed super fund is you might get a letter from the ATO saying: ‘Have you diversified your investments?’ So it’s a bit hard in that respect,” he said.
During the last quarter of 2019, the ATO issued letters to 17,700 SMSF trustees questioning the presence and validity of the investment strategies of their funds.
