SMSFs

The bond market has never had great investment appeal for Australia’s self-managed superannuation funds, but with rising yields improving their proposition, some observers say the investment tide may be coming in for fixed interest.

The regulator has issued 26 stop orders against 18 companies for failing to adequately target financial products to the appropriate market since the “design and distribution obligations” regime began, it said in an initial compliance review. And it warned that closer scrutiny is coming.

With the prospect of a recession in Australia still looming large, SMSF investors might take comfort in new research showing that while their sector underperformed APRA-regulated funds in a booming 2021, SMSFs weathered the last contractionary environment, in 2020, better than larger funds did.

Nearly 32,000 customers of Australia’s four major banks fell victim to scams in the 2022 financial year, bearing 96 per cent of the losses as reimbursement and compensation rates remain extremely low. ASIC is now pushing financial institutions to improve their approaches to scams and better support their customers.

Treasury’s plan would increase the headline tax rate to 30 per cent from 15 per cent for earnings on superannuation balances above $3 million. The SMSF Association and others have called it unsustainable and discriminatory to SMSFs.

The shift to healthy longer term deposits has begun, and while Australian equities still dominate SMSF portfolios, the way they access them is changing.

The most important aspect of SMSF membership is commitment, SuperConcepts’ Graeme Colley told advisers at the SMSF Association’s National Conference, stressing that potential trustees’ prime consideration should be whether they have the time and energy required to run a successful fund.

Peter Burgess told the SMSF Association’s National Conference the industry group has pushed for some of the developments, while it continues to oppose others, such as a high-balance cap. The government now plans instead to double the tax rate for funds with very high balances.

The success and popularity of SMSFs has also given several hundred thousand people direct access to their retirement savings. More concerning, the ATO believes, is that fraudsters are starting to take notice.

Despite a growth hiccup in 2022 the SMSF sector is trending in the right direction, with more younger people opting for choice in the way they manage their retirement savings.

Superannuation tax breaks will cost the government nearly $53 billion this year, nearly matching the cost of the entire age pension program, according to a new analysis that says major reform is needed. Meanwhile, the government has signalled a tightening of super legislation.

Gold has never held strong investment appeal for SMSFs, despite being seen as a hedge against inflation. With the precious metal beginning a so-far volatile 2023 full of steam, SMSFs looking to preserve capital have several reasons to consider incorporating gold into their portfolios.