SMSF property spruikers at it again

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ASIC has charged former company director Steven William Hill of NSW with eight counts of fraudulent misappropriation.

Hill allegedly met with numerous investors based in NSW and recommended they set up an SMSF for investment in the development of a number of house and land packages located in Queensland. ASIC alleged that through Hill Stephens & Associates and International Finance Consortium (Aust), Hill dishonestly induced various investors to pay approximately $618,000 to acquire interests in a “house and land” property development located in Queensland.

It is alleged that investors never received the returns promised, and that $431,000 of the invested funds were directed to company bank accounts to make payments to Mr Hill and other third parties.

Small Independent Superannuation Funds Association (SISFA) director John McIlroy says that the more these instances happen, the more likely it is that regulators will want to change the rules, and this will not be a good thing.

“When the Government changed the rules for gearing into property through your super, they did indicate that they would review the decision in a few years after they’d done it…It would be a bad thing for those that are setting up these arrangements properly.”

He says the Government might “can” the ability altogether for SMSFs to have the ability to gear through property. Another possible solution however, is to limit super fund gearing to 50%, says McIlroy. “Then you’d have a bit more control over the extent to which funds could borrow. That would be a more workable rule than what we currently have.”

It is Australians’ love for property that makes the idea so popular, and there are good things about investing in property if someone has enough money in super. But McIlroy says that in many of these situations there’s no work being done as to how the arrangement might eventually end.

“If people do this without having someone advising them that knows these things in detail, then the chances of getting it wrong go up. If the person setting these things up is the person promoting the property then often everything’s geared around getting that property purchase and sometimes you’ll see the arrangements are not set up properly.”

  • alleycat on 19/06/2013 4:16:29 PM

    So what do we do about accountants who constantly recommend their client set up a SMSF whether it's appropriate for them or not.
    In a recent case two PAYG employees on a combined income of $85K were induced to set up a SMSF by their previous accountant. They had collectively $100k in the fund and it was sitting in a Term Deposit. Since they were employees, there was almost no chance to add to the fund for a number of reasons.
    Their accountant (who is now a guest of the crown) told them they could access their SMSF and pay down their $270K mortgage.
    Needless to say the ATO found out.
    Their Trust Deed was set up 8 years ago and without looking at the original document, I doubt if it would allow for a Non -recourse loan.
    The question of buying a property was asked.
    Current personal loan commitments wouldn't allow them to fork out the shortfall for a $400K loan. Current savings wouldn't even allow them to do a Trust Deed update to allow for borrowing in the fund.

    My point is, most financial planners appear honest, but not all. Most accountants who dabble in our area knowledge know most of this, but certainly not all.
    Do we blame all accountants like we blame all financial planners for being less than competent ?

  • Peter Johnston - AIOFP on 19/06/2013 3:00:17 PM

    What has gearing got to do with it? This is about shonky advisers working outside the famous 'SHORTEN FLAGS' of non APRA/ASIC reglated areas. Rather ironic that our dear Minister has tried to bash the independents but at the same time promoted the SMSF sector that allows consumers to deal outside of APRA/ASIC regulation. Lets just hope enough residents of Maribyrnong vote for the Coalition in September to give our 'friend' what he deserves.

  • Adrian on 19/06/2013 1:48:51 PM

    Having seen the good and the bad it really comes down to, is it appropriate and do the figures make sense. Over leveraging to buy hyped up properties relying heavily on super contributions to substantiate cashflow is only going to lead to one outcome..bad

  • Scott on 19/06/2013 1:41:46 PM

    Thank god i have a relevant uni degree and can recommend a salary sacrifice arrangement to a client! Maybe for a second the government could focus a little more on these blatant criminals that mask as property advisers and let us get on and do our job which is to help educate people so they are not sucked in by these crooks

  • Peter Johnston - AIOFP on 20/06/2013 8:59:16 AM

    The Accounting fraternity have a wonderful PR division that portrays them in a great consumer light. They have managed to deflect the Great Southern/Timbercorp fiasco where 35% of all inflows were from Accountants licensed directly to them, they work in a totally conflicted rorted hourly rate environment, over 40% of all SMSF's are set up for the wrong reasons, a lot more of them in jail than advisers and the list goes on! They have done a great job and we should learn from it.....

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