Why big super's pseudo-SMSF won't deliverBY KRIS KITTO | FRIDAY, 7 MAY 2021 11:55AM As the success of SMSFs boomed in the last decade, some industry funds rolled out self-directed or member direct investment options that allowed their members to invest (with ... Upgrade your subscription to access this article
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Climbing to the top
DANIEL SHRIMSKI
MANAGING DIRECTOR
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MANAGING DIRECTOR
VANGUARD INVESTMENTS AUSTRALIA LTD
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Thankyou Kris for your insights. To address your suggestion that big super funds pull money out of investment portfolios to cover future tax liabilities: in fact, they don't - they create an accounting provision for deferred taxes in valuing member accounts but this accounting liability is not backed by cash. It is essentially a gearing effect as the money remains invested to earn compounded returns until the tax is actually payable. This is really the same as SMSFs; it's just that the deferred tax liabilities are made explicit in the member account valuation. The point is that both types of funds can earn compounded investment returns until the tax actually has to be paid.
Just wanted to point out this article is inaccurate and probably misleading. Pseudo-SMSFs let each member who chooses to use them to accumulate unrealised gains just like an SMSF. Additionally some of them also allow members to transfer their investments in specie to the retirement phase and to directly benefit through the unrealised gain provision being removed boosting the balance available for retirement income.