Warnings issued about SMSF property investments

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SMSF residential property investment can be a dangerous game if caution isn’t exercised and should only be taken on with the guidance of an adviser, according to industry groups.

Both wealth advisory William Buck and online SMSF deed provider Deed Dot Com have issued warnings about property investments in the self-managed super fund arena.

William Buck wants tighter regulations around the inclusion of residential property in SMSFs.

“The level of investment activity in the residential property industry in the past 18 months has significantly increased,” said wealth advisory director Fausto Pastro. “Within this context, it is important that those advising investors regarding the purchase of residential property for inclusion in SMSFs are appropriately regulated.”

He said caution should be exercised around the inclusion of this asset class because its general investment characteristics are low income producing and unpredictable gains.

“Residential property for many is an inappropriate asset to include in an SMSF,” said Pastro. “Investors should be very wary before making a final decision to put this type of asset into their fund.”

Deed Dot Com founder Manoj Abichandani agrees, and said advisers and accountants need to lift their game when it comes to providing their SMSF clients with the best possible outcomes from property investments.

“Real estate investments will only turn out to be the ‘bonanza’ they are sometimes portrayed as, if accountants and advisers are providing SMSF clients with proper guidance, particularly in the area of claiming depreciation and capital works allowances,” he said.

A good solution is to always call in a quantity surveyor at the time of purchase. Advisers who do not recommend this are doing their clients a disservice, Abichandani said.

This is because the ATO will look upon the quantity surveyor’s findings as an expert report and give advisers and their clients a firm basis for making depreciation reports.

“Quantity surveyors can prepare reports on industrial, residential and commercial properties and the outcome of acquiring a QS report is invariably a reduction in the taxable income an SMSF must report,” he said.

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  • Rosemary Johnston (PIAA) on 3/04/2014 3:17:49 PM

    Property investment advice is a very loose definition that includes the exaggerated claims of real estate agents working for the seller right through to client's best interests written advice with PI insurance backing. SMSF trustees have considerable responsibilities and yet are being referred to seller's agents for their property investment by their suitably qualified accountants and financial planners. This does not support balanced outcomes. What we need is clear support of current laws that enshrine the client's best interests for SMSF investments and no seller's agent would qualify to have a role!

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