SMSF warning: ATO zeros in on property borrowing

by Mackenzie McCarty21 Nov 2012

The Australain Taxation Office (ATO) has warned trustees of self-managed superannuation funds (SMSFs) to be cautious when investing in property.

Acting commissioner Bruce Quigley says he is concerned people are using their SMSF to invest in property without fully understanding their obligations under the law - or that some are seeking to take advantage of certain types of arrangements.

Quigley acknowledged that investing in property can be a confusing area for some people.

“We have observed that some arrangements are deliberately entered into to get around the law, which can result in the fund’s trustees being disqualified, facing civil penalties or even facing criminal charges. Those marketing properties to SMSF trustees as part of such arrangements could be referred to ASIC.”

Quigley says the finer details are important and that trustees must ensure that property is the right investment for their SMSF - and that the arrangement is legal.

“We have also seen instances where holding trusts have not even been established at the time the contracts to acquire are signed. In other instances, the title of the property is held in the individual’s name rather than the trustee of the holding trust. Another common mistake is gearing in a related unit trust, which is not allowed under the law.”

He says some of these arrangements, if structured incorrectly, can’t simply be fixed.

“The only option may be to unwind the arrangement which could involve forced sale of assets at an inconvenient time. This could be very expensive for the fund with potential stamp duty and tax consequences.”

“I urge trustees to get reliable, independent advice when making investment decisions and to obtain advice from us if they are contemplating entering into these sorts of arrangements. The responsibility for ensuring their SMSF complies with the law rests with them.”


  • by FBAA waste of time 21/11/2012 10:20:39 AM

    Brokers are Advising on thisand advising borrwoers about super


  • by Peter Wood 21/11/2012 11:23:44 AM

    Trustees of SMSF's are totally responsible for structures and the investment strategies of their Self Managed Super Funds. Brokers purely facilitate the lending.Its a Self Managed Super Fund...not a Financial Planner managed super fund...not an Accountant managed super fund and definately not an ASIC managed super fund..I would highly recommend trustees do a SMSF accreditation via Kaplan or similar so trustees comprehend their legal obligations.

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