ATO warns SMSFs on property
The Australian Taxation Office (ATO) has warned self-managed super funds (SMSFs) to be cautious when investing in property - and to make sure they fully understand their obligations under the law.
While property can be confusing for some people, ATO Acting Commissioner Bruce Quigley said some trustees are taking advantage of the system.
"We have 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," Quigley said.
"Those marketing properties to SMSF trustees as part of such arrangements could be referred to the Australian Securities and Investments Commission."
Some of the common mistakes are gearing in a related unit trust, holding the title of the property in the individual's name rather than the trustee of the holding trust, and signing contracts to acquire without acquiring the holding trust.
"Some of these arrangements, if structured incorrectly, cannot simply be restructured or rectified," Quigley said.
"The only option may be to unwind the arrangement, which could involve forced sale of assets at an inconvenient time," he said, adding this could be very expensive for the fund, with potential stamp duty and tax consequences.
Quigley urged SMSF trustees to get reliable and independent advice when making investment decisions and to obtain advice from the ATO if they are contemplating entering into these sorts of arrangements.
"The responsibility for ensuring their SMSF complies with the law rests with [the trustee]," he said.
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