At the risk of facing adverse and unintended consequences, myths around the tax status of self-managed superannuation funds or SMSFs are being perpetuated, according to Chartered Accountants Australia and New Zealand superannuation specialist, Liz Westover.
She pointed out that the SMSF industry has had to get rid of the myths and misconceptions that surround the SMSF, including those that say that the SMSFs operate under special tax laws.
Misconceptions like these are being continued or spread by people who should know better. The myths also gained momentum because the flow of funds into the SMSF sector has been a concern for some of the larger funds for some time now.
Westover points out that there are no special tax laws for SMSFs and that the tax rules are the same for all superannuation entities.
One of the advantage of the SMSFs is they were able to manage the rules more efficiently than their larger counterparts and they cited the example of sale of assets for capital gains tax purposes or the timing of investment transactions with pension commencement.
In an adverse outcome of the continued myth surrounding SMSFs, people are driven to establish SMSF or to make enquiries about SMSF simply because of the tax reasons.
Read the article here.
What do I think about this?
The myths surrounding the SMSF, or at least any myth surrounding money, can be very misleading and oftentimes, it can lead to serious consequences whenever they are listened to and accepted on face value. Let’s face it. Retirement income is a very serious topic for discussion even at the early age of 30 and 40 years old because you don’t want to retire broke.
But the thing about these SMSF myths is that they not only mislead people into getting one but they also make SMSFs look bad. This is why whenever I talk to people about getting an SMSF, I make sure to clarify these myths or issues surrounding them.