ASIC Updates its guidance on when a Self-Managed Superannuation Fund (SMSF) is suitable – now deemed more attractive at balances of $200,000 or more

In October 2019, ASIC had issued guidance that only where a Self-Managed Super Fund (SMSF) has a total investment balance of $500,000 or more, including single and multiple member (family) SMSFs, should licensed Financial Advisers consider recommending them to clients.

The October 2019 guidance considered that only at this minimum balance or over, the performance of an SMSF was comparable to that of other Super Funds.

This had drawn some criticism from those in the SMSF space, who had argued that $200,000 was a more realistic figure, and that there were other factors to be considered other than cost.

The SMSF association released a paper in the 2020 FY that included a study by the University of Adelaide, which concluded that at the $200,000 balance level or higher, SMSFs actually were more cost effective than other Super Funds.

ASIC has now taken onboard the feedback from those Professionals and Associations working daily with SMSFs and in December 2022, they released new guidance. The updated guidance now requires licensed advisers to use professional judgement when recommending an SMSF to a client.

This judgment would include considering the client’s relevant circumstances and explaining the implications of the SMSF advice recommendations.

An SMSF is not for everyone with a balance over $200,000 and the right choice for superannuation between Industry, Retail and SMSFs depends on a range of factors outside of costs. You should consult an experienced and professionally qualified firm to assess whether a SMSF is right for you.

Some of the factors that should be considered when determining whether a SMSF is suitable for you are:

  • whether you understand and accept that although you may outsource your SMSF responsibilities to professional advisers, you (as the SMSF trustee) are responsible for ensuring compliance with superannuation, corporations and taxation laws;
  • whether you have the time, skills, general interest, and experience to meet your trustee responsibilities;
  • whether you are considered a vulnerable person and may now, or in the future have some cognitive impairment or accessibility constraints;
  • the cost-effectiveness of an SMSF considering your existing arrangements and relevant future circumstances;
  • whether you have any future plans to move overseas as this decision may have an impact on the fund and its ability to meet the residency rules; and
  • other arrangements that may still provide some of the benefits of an SMSF, such as ‘a member directed investment facility’ within an APRA-regulated superannuation fund.

ASIC’s updated guidance can be found here

We welcome the change in ASIC’s guidance on the suitability of SMSFs at a lower balance of $200,000. It is a change that is pragmatic and allows for more Individuals and Families to take control of their super.

DFKBKM and Benjamin King Money Wealth provides Financial Advice and Accounting Services to many Clients for their Retirement Planning; often utilising the advantages of a Self-Managed Superannuation Fund.

If you are considering a SMSF now or in the future or already have a SMSF but what to review your strategy, please contact Grant McWhinney, Murray Nicol – SMSF Specialist Advisor (SSA®) or Daniel Shaw – SMSF Specialist Advisor (SSA®) who can guide you for all your SMSF Requirements.

The information provided does not constitute financial product advice. The information is of a general nature only and does not consider your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances.