SMSF trustees warned not to take financial advice from real estate agents

SMSF trustees warned not to take financial advice from real estate agents

Trustees of self-managed super funds are being warned about the legal implications of accepting advice from real estate agents when investing their funds in property.

The warning comes as hefty new penalty regimes that punish trustees misusing their SMSFs came into place at the start of July.

Australian Securities and Investments Commission commissioner, Greg Tanzer, raised the issue yesterday when he spoke at the annual CPA Australia Self-Managed Super Funds Conference.

“ASIC is aware that there has been a sharp rise in promoters recommending that investors either set up or use an existing SMSF to invest in property,” Tanzer said in his speech. “These promoters may not be complying with the law.”

Tanzer said ASIC was concerned that, with the increased popularity of SMSFs and property investment, real estate agents and property advisers may not have realised they may be providing financial product advice and may need an Australian Financial Services (AFS) licence, or authorisation under an AFS licence.

“Specifically, we are concerned about advertisements claiming that consumers can use their superannuation to purchase a property using the NRAS and receive ‘$100,000 tax free’,” said Tanzer.

“These advertisements do not provide a balanced message about the features, benefits and risks of investing in NRAS property through an SMSF,” he said.

Graeme Colley, director of technical and professional standards at the SMSF Professionals’ Association of Australia, told SmartCompany a trustee cannot seek advice which is regarded as financial product advice from anyone without an Australian financial service licence or authorisation of one.

“If you seek advice, make sure it is from are a licenced financial planner,” says Colley.

Colley says it is likely that most real estate agents are unaware that what they are doing could be illegal. He says agents frequently give advice about investing in personal property, but should be aware that there are different laws concerning SMSFs.

“The same rules don’t apply as investing in personal property,” says Colley, who says even a ‘barbecue conversation’ regarding where money should be invested is considered financial advice.

Colley and the SMSF Professionals’ Association of Australia are calling for legislation to be put in place to give ASIC further control over the type of advice given and by whom.

He warns SMSF trustees to “get a second opinion” if advised to roll over their superannuation to set up a SMSF fund and invest in property.

Colley also warns anyone nearing retirement age about the potential danger of investing their SMSF in property. He says for those near retirement who invest in real estate – and who then find that they can’t get a tenant or need cash flow – contribution age rules may stop them from putting money back into the fund.

“The older you are the more careful you need to be,” he says.


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