The ATO today warned trustees of self-managed superannuation funds (SMSFs) to be cautious when investing in property.
"The fine details are important and trustees need to be sure that property is the right investment for their SMSF and that the arrangement is legal,"
"We have also seen instances where holding trusts have not even been established at the time the contracts to acquire are signed. 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 is not allowed under the law,"
"Some of these arrangements, if structured incorrectly, cannot simply be restructured or rectified. The only option may be to unwind the arrangement which could involve forced sale of assets at an inconvenient time. 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 us if they are contemplating entering into these sorts of arrangements. The responsibility for ensuring their SMSF complies with the law rests with them."