In my experience as Principal Financial Adviser at Gary Weigh & Associates, SMSFs are appropriate for some people, and many others find themselves in an SMSF for the wrong reasons, but regardless, what started out as an exciting journey of self-destiny, can become a large weight on trustee shoulders over time.
The reasons are simple! Trustee needs and circumstances change significantly over time, and here are my five (5) reasons why:
1. Some trustees grow older and slow down
2. Trustee focus shifts to more interesting retirement pastimes
3. Where one trustee is dominant, that person may lose interest or capability
4. Death, disability or illness interrupts the management process
5. The investments in the fund change to the point that an SMSF is no longer warranted
When you have been doing this as long as I have, it is not unusual to see a clear need to convert illiquid assets such as real estate property into cash or other investments that can be quickly converted to cash. It is a natural process as members continue to age and their circumstances change.
Although there can be a number of triggers, these are three of the most common:
• The fund needs to sell down assets in order to continue to pay pensions
• A member might have a need for cash to finance aged care
• Assets are sold down at an opportune time to take profit
I think that if the original need for an SMSF disappears (e.g. the major property asset is sold), trustees should not feel trapped in a structure that demands a lot of time in compliance and administration. It is possible, and often beneficial, to exit an SMSF transition back to personal superannuation.
I firmly believe that strategy is always determined on a case-by-case basis. Of course, there are good reasons for some clients to stay with the SMSF structure. For example, family business ownership is transferred to the younger generation, and the business premises is owned by the SMSF; or where SMSF longevity is being extended by adding adult children as members.
However, if this is not the case, and the original need for an SMSF has changed, I can tell you that there are some very good reasons why transitioning back to personal superannuation should be considered.
The advantages include:
• Members no longer have to bear the burden of trustee responsibility, compliance and administration
• Members of retail personal superannuation funds (at least the ones I recommend) pay anti-detriment payments. This is effectively a return of contributions tax paid in addition to an accumulated and / or insured death benefit when a member dies
• Members have access to the Superannuation Complaints Tribunal in the event of a complaint against the super fund.
For more information about SMSF and other retirement services offered by Gary Weigh & Associates, visit www.garyweigh.com/advice.