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Rule-tinkering swamps SMSF investors, survey finds

Emma Rapaport  |  08 Jun 2018Text size  Decrease  Increase  |  
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Keeping on top of changing rules has become the biggest concern for SMSF trustees following years of government tinkering, an investor survey has found.

SMSFs trustees now cite “keeping track of changes in rules and regulations” as their biggest challenge, overtaking last year’s top concern: “choosing what to invest in”, according to the Vanguard/Investment Trends 2018 SMSF Report.

Almost 30 per cent of 2315 survey respondents cite rule changes this as their biggest concern, up from just over 20 per cent last year.

Keeping track of changes to rules is not the only concern. Just over 20 per cent of trustees say they worry about the potential impact of rule changes to their super, while 17 per cent say that they struggle to understand the changes.

Commenting on the results, Investment Trends chief executive Michael Blomfield says he began to see a notable shift in the industry following the 2016 Federal Budget in which trustees were blindsided by a limit to the total amount of super that could be transferred into the retirement phase - also known as the $1.6 million transfer balance cap.

“The 2016 budget was the first time ever where SMSF trustees and planners started to say ‘eugh, maybe I should be investing outside as well as inside super’, and that was a really big moment. The confidence has not returned after that regulatory change,” Blomfield says.

“Irrespective of what you think about some of the changes being proposed around dividend imputation credits, the fact of more discussion of changes just keeps driving complexity and uncertainty.”

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This year’s budget added other changes, including an expansion in the number of members allowed in an SMSF, and changes to the auditing cycle.

Drilling down into the profiles of SMSF trustees, those with a balance of more than $2.5 million were by far the most concerned about keeping on top of rule changes, while those managing smaller balances listed more pressing concerns such as finding time to plan and review their portfolio.

“If you’re managing less than $1 million in your SMSF, regulatory changes haven’t really affected you,” Investment Trends research director Recep Peker says. “It’s those managing larger balances who have really felt the effect of the $1.6 million cap and other regulatory changes.”

The survey found that “knowing what investments to make” was less of a concern this year, falling to 26 per cent, down from 31 per cent last year. The issues of “accounting fees and charges” and “finding time to research investments” both dropped out of the top five concerns. “Paperwork and administration” is now the fourth biggest concern, followed by “understanding rule and regulatory changes”.

Note: respondents were permitted to select multiple responses

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Emma Rapaport is a reporter for Morningstar Australia.

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