Powered by MOMENTUM MEDIA
Powered by momentummedia
nestegg logo

Invest

Property strategy raises alarms at Tax Office

By Reporter
  • March 12 2019
  • Share

Invest

Property strategy raises alarms at Tax Office

By Reporter
March 12 2019

Given current market conditions, the Tax Office is set to contact individuals it believes have risky property strategies in the wealth portfolios.

Property strategy raises alarms at Tax Office

author image
By Reporter
  • March 12 2019
  • Share

Given current market conditions, the Tax Office is set to contact individuals it believes have risky property strategies in the wealth portfolios.

ATO

Australians with self-managed super funds (SMSFs) are permitted to leverage their savings to make investments.

Overwhelmingly, property is the most popular investment choice, and 95 per cent of all loans in an SMSF are for the purpose of property investment.

Activity spiked after 2007, when the leveraging strategy was first allowed by the federal government and regulators.

Advertisement
Advertisement

Now, the ATO is signalling its concern about the possibility of “concentration risk” in some funds. This means the savings and viability of a portfolio is compromised due to the dominance and reliance of one asset.

ATO

Concentration risk is compounded by falling property prices across Australia and struggling rental yields in some capital cities. The superannuation fund is required to service the debt, which requires decent cash reserves and equity.

The ATO will contact SMSF investors which it believes are at risk of compromising their retirement savings based on their property strategy.

“Trustees are legally obliged under the SIS Act (Superannuation Industry [Supervision] Act 1993) to consider diversification and liquidity risk as part of their investment strategy,” said assistant commissioner Dana Fleming.

“Where we identify potential concentration risk, we will write to trustees to ensure they adequately understand and mitigate the associated risks,” she said.

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on X for the latest updates
Rate the article

more on this topic

more on this topic

More articles