28 Aug 2014

While it does not support a mandatory minimum balance for SMSFs, ASIC has suggested there could be merit in introducing a “soft” minimum balance or guidance on an appropriate minimum balance for SMSF establishment.

In a submission to the Financial System Inquiry (FSI), ASIC acknowledged there are situations in which establishing a low-balance SMSF may be in the best interest of its members.

However, ASIC said there is potentially merit in introducing either a “soft” minimum balance or some further guidance on what an appropriate minimum balance for an SMSF would be.

“This may mean, for example, that a minimum balance applies unless certain requirements are satisfied. An alternative is to provide guidance on an appropriate minimum balance for SMSFs, which could be strengthened by applying an ‘if not, why not’ disclosure requirement,” ASIC stated.

“That is, if the accountant or adviser recommends an SMSF for a client below, for example, $100,000, then the accountant or adviser would need to explain why it is appropriate to recommend an SMSF to a client with a low balance.”

The minimum balance required to adequately cover the cost of operating an SMSF has been reduced from previous estimates, ASIC noted.

There may also be merit in considering what better information could be provided to potential SMSF members about the cost-effectiveness of SMSFs, ASIC said.

ASIC also reiterated it remains concerned about issues related to SMSFs and leveraging, and is keeping a “close eye” on ensuring that services provided in relation to SMSFs do not subject trustees to risks they are unprepared for.

Written by Katarina Taurian for the SMSFadviser.

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