SMSF property spruikers at it again

by |

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.”