SMSF property investments will be monitored: ATO

SMSF property investments will be monitored: ATO

Posted on Tuesday, November 20 2012 at 3:26 PM

The Australian Taxation Office (ATO) says it’s aware of property investors using self-managed superannuation funds (SMSF) to deliberately skirt around the law and it will come after those doing the wrong thing.

ATO acting commissioner Bruce Quigley says
some don’t fully understand their legal obligations while others are “seeking
to take advantage of certain types of arrangements”.

“We’ve 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,” he says.

“The fine details are important and
trustees need to be sure property is the right investment for their SMSF and
that the arrangement is legal.”

In some cases, SMSF holding trusts hadn’t
even been established when a property purchase contract was signed, he says.

“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
isn’t allowed under the law.”

Fixing an incorrectly structured investment
isn’t simple, he warns. The only option could be to unwind the arrangement and
sell the assets involved.

“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 (the ATO) if they’re contemplating these sorts of arrangements,”
Quigley says.

Companies marketing properties to SMSF
trustees with the express intention of exploiting loopholes could be referred
to the Australian Securities and Investment Commission.

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