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Former ASIC investigator offers SMSF compliance tips


A former ASIC investigator has offered practitioners in the SMSF space suggestions on how to avoid compliance issues while highlighting a number of “red flags” he says the sector is facing.

By Katarina Taurian3 minute read

Speaking to AccountantsDaily’s sister publication SMSF Adviser, Compliance One principal David Carson, who worked at ASIC from 2003–2012, said to avoid compliance issues SMSF practitioners should always ensure there is documented evidence that the client is leading the decision-making.


“I don’t mean that they should be all hands off and let the customer do all the decision-making,” he said.

“Just [keep] very good records that demonstrate that you’ve got full engagement from the customer and it’s not the adviser driving the transaction or the investment relationship,” said Mr Carson.

In terms of the sector’s biggest “red flags” Mr Carson said that practitioners not understanding the full implications of what an SMSF is, and what educational requirements people need to be able to advise in the sector are big concerns.

One of the more common issues relates to understanding the difference between a credit adviser giving credit assistance in structuring the borrowings around an SMSF versus talking specifically about using the SMSF as a financial product, Mr Carson said.

“Whether it’s credit advisers or financial planners there are people who are keen to be able to advise in that space because obviously SMSF balances represent a large sum of money, so it gives people a good opportunity to be creative with investment opportunities using SMSF money,” Mr Carson said.

“But they need to first understand exactly what an SMSF is in terms of what its legal structure is and what they can and can’t do in relation to giving advice on it.”

Mr Carson also questioned whether those pursuing SMSF borrowing strategies “truly understand” what they’re doing.

Mr Carson said he believes SMSF lending will always remain high on the regulator’s agenda, with ASIC set on ensuring practitioners giving advice related to SMSF lending are adequately qualified and appropriately trained.

“It’s a massive regulatory hot button, it’s an area which is fraught with potential problems and some of them aren’t going to manifest for many, many years.”

Mr Carson said that because superannuation is a long-term investment, investors may be less inclined to make “careful” decisions when it comes to SMSF borrowing.

He said the decisions investors are making may not be necessarily as well informed as they would be if investors were expecting to access the funds in the short to medium term.

“That real long-term time frame can sometimes cloud people’s investment choices,” Mr Carson said.

“Because it’s such a long-term performance issue, people can make a lot of statements and promises about the expectations of property over a long period of time, and you don’t actually get the chance to test that for many years,” he said.

“I think you’ve got a case of a very willing group of investors and a hungry group of advisers and that’s always a dangerous mix when they meet,” he added.


Former ASIC investigator offers SMSF compliance tips
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