ASIC Warning: SMSFs Beware of Property Spuikers

Posted in Wealth
28/11/2012 Level One

ASIC warned investors this month about setting up self-managed superannuation funds simply as a vehicle of investing in “dodgy” property. Similarly ASIC has stated that it will be undertaking “limited surveillance” of financial advisers and accountants for spruiking this strategy.

“We don’t want SMSFs to be the preferred vehicle for dodgy property spruikers,” says ASIC commissioner Peter Kell.

Kell says being encouraged to set up a SMSF “solely to invest in direct property” should be a “warning sign” for consumers.

Investing in property through a SMSF holds significant tax advantages with the maximum rate of tax paid on rental income being 15% and falling to 0% if the SMSF is in the pension phase.

This compares with personally held property where rental income is taxed at a marginal tax rate, which in some cases can be as high as 46.5%.

However investors must understand the risks pertaining to this type of investment, as well as property investment in general, and take into account their full personal and financial circumstances before jumping into action.

“ASIC has concerns that people are being encouraged to set up SMSFs in situations where they don’t have the resources, experience and understanding to ensure they actually generate the expected benefits,” says Kell.

Kell says the resourcing issue is not just about money but having the time to properly manage your SMSF.

Another issue these investors face are the unscrupulous financial advisers that “hide” large commissions by forming alliances with developers to push this strategy.

As always it is best to get independent advice and/or a second opinion.


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