Complacency can lead to contravention. When trustees enlist your services to assist with a self-managed super fund or just generally build wealth, they may have some misconceptions about what they can and cannot do. It’s important to impart all the right information to ensure ongoing SMSF compliance – especially as the 2017 super changes take place.

1) SMSFs are only beneficial for the wealthy

With all of the talk around the retirement phase transfer balance cap of $1.6 million, many people may get the misconception that SMSFs are primarily for people who have that much money put aside.

However, that’s not the case. Australian Taxation Office (ATO) data for the 2014-15 financial year showed that 23.7 per cent of funds had a balance between $200,000 and $500,000, and a further 24.2 per cent sat between there and $1 million.

What do trustees need to understand about their SMSF?

For the same year, the median value of assets per trustee was just above $350,000, and the majority of trustees earned less than $60,000. Australians can open an SMSF no matter what their wealth status is.

2) SMSFs are a simple way to buy property

Trustees can use an SMSF to purchase investment property as part of their portfolio, and it can be a very profitable purchase. However, it is considerably more difficult to manage than an independent property investment.

Related parties cannot benefit from the property in any way.

As we covered in a recent article, related parties cannot benefit from the property in any way. There are strict requirement if trustees borrow funds from the SMSF to buy it, and comprehensive work needs to be done on lease agreements and insurance. It can be done, but advisors and trustees must work hard to ensure the investment passes an SMSF audit.

3) SMSFs are a risky decision

Yes, making sure SMSF compliance is up to scratch can be difficult, and trustees are making complex financial decisions when they open an SMSF. But with the right financial advice and guidance, it can be an excellent way to build wealth for retirement – evidenced in the savings people on a wide range of incomes have made so far through the system.

February 2016 data from Multiport also indicates that the 10 most popular investments for SMSFs are some of the biggest companies in Australia – perhaps even safer than houses.

It’s easy for trustees to get the wrong idea about operating an SMSF. But keep them on the right track, and SMSF compliance shouldn’t be a problem.