Poor advice alleged on residential property

A high proportion of mum and dad investors who have piled their savings into residential property may not have been appropriately informed about the taxation downside, according to survey data released this week.

The survey, undertaken by Roy Morgan Research on behalf of http://www.InvestorOne.com.au, suggests that up to 78 per cent of people investing in residential property are unaware of all the tax implications.

What is more, the chief executive of InvestorOne.com.au, Christopher Batten, claims this is despite the fact that around 70 per cent of those surveyed had sought advice from a professional.

“In fact, the Roy Morgan Research shows that a tiny 1 per cent of respondents were advised that rents and any capital gains are not able to be transferred to superannuation funds and will not be able to attract any taxation benefits if the property is owned in the private name of the investor,” he said.

Batten said that it was simple to eventually avoid paying tax on residential property investments if they were acquired via unit trust.

“It’s a scandal that listed securities, commercial and industrial property are allowed to be transferred into a self-managed super fund but residential property investments are not allowed. It means investors must be very careful of how they undertake the acquisition,” he said.

“It’s a sad indictment of the financial advisory industry that ordinary investors are not being advised correctly and this lack of proper advice will ultimately cost them thousands and thousands of dollars,” Batten claimed. “It makes no sense for mum and dad investors to purchase a residential investment property to help set themselves up for retirement, yet sacrifice a huge pot of money to tax simply because they are unaware of an extremely simple purchasing structure.”