NC2020 – C4A – Managing the SMSF liquidity problem

This recording was presented at the SMSF Association National Conference 2020 on the Gold Coast by Natasha Panagis, Technical Manager, AIA Australia.

OVERVIEW

There are many risks an SMSF faces when majority of its funds are held in one asset such as property, particularly when an LRBA is used to acquire the asset. With the ATO raising concerns about SMSFs and the lack of investment diversification, clients with ‘lumpy’ illiquid assets must give proper consideration to diversifying their fund’s investments or ensuring the fund has enough liquidity to safeguard the fund’s assets.

This session will consider how insurance can play an important role in providing liquidity to an SMSF when paying a death benefit from the fund. Included is a discussion on why SMSF trustees should start with the end in mind and how insurance can provide a platform for a robust exit strategy following the death or disability of a fund member. We also consider the challenges with unrelated business owners in SMSFs and address their options in the event of death or disability.

LEARNING OUTCOMES

The recording will provide participants with knowledge and understanding to:

• Analyse the ATO’s approach to SMSF investment strategies and whether clients meet the regulatory requirements
• Discuss and address the difficulties that may be encountered on the death or disability of a member particularly when a SMSF has illiquid assets and/or a LRBA
• Identify the value for clients of including insurance as part of their SMSF investment strategy for liquidity purposes

Details

Knowledge Area:
Benefit Payments, Taxation
CPD Hours:
1

Speakers:

Natasha Panagis SSP, SSA