Financial advisers must be stern with clients to protect themselves from being hit by the rising number of superannuation liabilities and compliance issues in the self-managed superannuation fund (SMSF) space, an industry lawyer said.
Warning clients of the consequences rather than simply requesting information is one strategy that advisers can improve on, according to DLA Piper Australia partner Heather Gray.
"It's more important now than it has been in the past for advisers to give those warnings," Gray told delegates at the 2012 Self-managed Super Fund Professionals' Association of Australia (SPAA) SMSF National Conference.
"What we do see is clients saying that their adviser didn't say what would happen if something was incorrect, but had they realised they'd get a tax bill like this, they would've tried harder."
Gray said outlining the very substantial taxes or other action taken by the Australian Taxation Office as a reality for incomplete or inaccurate information must be communicated.
"At the moment, there are more opportunities for liabilities to come back to advisers in the self-managed superannuation funds space than perhaps there have ever been before," she said.
Very small day-to-day oversights are being made with the breach of excess contributions tax the biggest issue creating the most liabilities.
"Contribution strategies are a real pressure point for advisers. The problem is that clients are really not in a position to understand the ins and outs of these contributions," Gray said.
"Because of the sudden-death way in which they operate, we are seeing a lot more of this type of liability arising."
She said advisers also need a structured process of procedures and checklists to be across all paperwork and requirements, particularly when taking on new clients.
"Once new clients are taken on, [after] a reasonable amount of time has passed, any problems that are lurking in that file affecting that fund are probably going to come back to bite the current adviser because the client is naturally going to say that he shifted all of the work to you," she said.
Gray also highlighted emerging issues, including failure to lodge or acknowledge notices of deduction, failure to properly advise on superannuation borrowing rules, and not meeting the minimum pension payments for the year and therefore, returning the fund to taxable mode.
"We're starting to see the beginning signs of it," she said.
"The conclusion is, it's probably the time more than ever for advisers to be paying a lot more attention to systems and procedures.
"These are problems that can arise throughout the advisory sector for self-managed super. We're seeing them coming from all directions."
