Concerns about marketing of geared property investment strategies to SMSFs.
The SMSF Professionals’ Association of Australia (SPAA) fully supports the strong reservations expressed by the Australian Securities and Investments Commission (ASIC) about the aggressive marketing of geared property investment strategies to SMSFs.
Jordan George, SPAA’s Senior Manager, Technical & Policy, says: “There is a role for gearing in an SMSF – but only where trustees have access to bestpractice advice from an advisor who is licensed and properly qualified.
“In a recent speech to the Tax Institute National Superannuation Conference, ASIC Commissioner Greg Tanzer expressed concern that some trustees were not receiving such advice, simply reinforcing what SPAA has been saying on this issue for the past year.”
Tanzer said that ASIC was worried by the increase in the number of SMSFs that were being targeted by unscrupulous operators. In a broadside to those pushing the boundaries, he added that the regulator was taking a close interest in the issue. Any advisor recommending an investment for the trustees of an SMSF, including property, requires an AFSL.
George says SPAA has consistently maintained that the use of gearing as an investment strategy is complex and as such always recommends that trustees get professional advice.
“When this issue began to gather momentum last year, SPAA issued a detailed note to its members outlining the positives and negatives of gearing as a strategy. We nailed our colours on gearing by SMSFs to the mast and haven’t deviated since.
“That said SPAA believes it’s worth noting that despite all the ‘talk’ around this issue, it’s still only a strategy used by a small minority of trustees.
“In our view talk of SMSF gearing being ‘out of control’ is simply not borne out by the facts. At June 2013, SMSF statistics show that only 0.5% of SMSF investments have limited recourse borrowing arrangements, and that this investment category has grown at less than 2% over the past four quarters to 30 June 2013. This level of involvement has been confirmed by one of the big four banks.”