Uncertainty for unlisted and DIY instalments in super
The proposed changes to gearing rules in superannuation will open a “can of worms” for investors who use unlisted or DIY gearing in their super funds, said Alpha Structured Investments founder Tony Rumble.
Rumble was referring to Government announcements last week that suggested changes to the borrowing arrangements by superannuation fund trustees and amendments to the tax law.
“Although the changes confirm that some forms of instalment gearing can legitimately be used in super, they raise serious questions about unlisted and DIY gearing in super,” he said.
“Gearing products that aren’t listed on the ASX are now seriously in doubt.”
Rumble added that the proposed changes make it clear that the Australian Taxation Office (ATO) will be looking to limit deductions and to impose capital gains tax (CGT) on instalments users, unless the investor uses an ASX-listed instalment.
“The new rules make it clear that investors buying ‘traditional’ instalments are treated as if they are the owners of the assets within the instalment,” he said. “That means that they can claim tax deductions for interest expenses on the instalment loan, and they don’t have a CGT liability when they repay the loan. But the changes also clearly state that the ATO views unlisted and DIY instalments as potentially giving the instalment trustee an interest in the underlying asset — meaning that it’s not clear that the investor can claim a tax deduction for interest expenses, and also making it possible for the ATO to impose CGT when the loan is repaid.”
Recommended for you
Insignia Financial intends to be the leading wealth manager by 2030 as it moves away from acquisitions to achieve $200 million in cost savings per annum over the next five years.
Count chief executive Hugh Humphrey is keen for the firm to be a leader in the new world of advice as the industry generates valuable businesses post-Hayne royal commission.
Four individuals, including three senior staff from Canaccord Genuity, have collaborated to launch their own Western Australian wealth management firm.
Thematic ETFs are beginning to gain ground among advisers seeking to enhance portfolio diversification and tap into specific growth themes, according to leading ETF providers.