ASIC warns consumers about SMSF Advertisements
Tuesday 22 October 2013
ASIC is today warning consumers about advertising that promotes the use of self-managed superannuation funds (SMSFs) to invest in residential properties through the National Rental Affordability Scheme (NRAS).
NRAS is run by the Australian Government in partnership with the states and territories to promote investment in affordable rental housing. The scheme offers direct payments and tax offsets for building and leasing housing to low and moderate income earners at a rate that is at least 20% below the market value.
ASIC is aware that a number of SMSF promoters include misleading statements in their ads about the grants that may be available under NRAS.
ASIC has seen ads stating that consumers can use their superannuation to purchase a property using the scheme and receive ‘$100,000 tax free’.
These ads do not provide balanced messages about the features, benefits and risks of investing via an SMSF in an NRAS property. Such ads should make clear to consumers:
- that eligibility to participate in the scheme is subject to restrictions
- the likely fees associated with purchasing, tenanting and managing properties purchased from NRAS-approved participants
- that to receive a total financial incentive of $100,000, consumers will need to remain in the scheme for 10 years, and
- that they will be required to rent out the NRAS property at 20% below the market value to eligible tenants.
NRAS aims to encourage larger scaled property investments (usually 100 or more houses). However, individual investors can access the scheme through an approved participant. The Department of Social Services publishes monthly reports on its website which contain the names of NRAS-approved participants.
SMSF investors should be aware that:
- if you are considering purchasing an NRAS property through an approved participant, there is no requirement for the incentives to be passed on by the approved participants to you
- the payment of the incentive to the approved participant is dependent on compliance with specific conditions
- there are likely to be fees associated with purchasing, tenanting and managing properties purchased from NRAS-approved participants, and
- any contractual arrangements in place should be checked to ensure that the relevant NRAS-approved participant will comply with all legislative requirements.
A person recommending that you make an investment through your SMSF will generally need to hold an Australian financial services licence. If you are approached about using an SMSF to invest in an NRAS property, or any property for that matter, check that the person you are dealing with is licensed to provide financial product advice by searching ASIC’s public register of AFS licensees or authorised representatives: see ASIC’s connect online. You should also do your research and consider whether the investment is appropriate for your retirement objectives.
‘ASIC is focused on protecting consumers and where we see people recommending consumers invest using their SMSF we want to ensure they are providing balanced messages that comply with the law,’ ASIC Commissioner Greg Tanzer said.
‘It is important that ads are clear, accurate and balanced, especially when consumers are looking for investments for their long-term retirement,’ Mr Tanzer said.
‘Consumers need to be cautious when presented with claims which appear too good to be true and should do their research before investing. Consumers should think carefully about how long they intend to hold the NRAS property, ensure that they understand the income and capital potential of an NRAS property and satisfy themselves that it fits with their investment purpose,’ Mr Tanzer said.
‘An NRAS property may not be suitable for everyone. Those who recommend any form of investments through an SMSF must be authorised to do so under an AFS licence and provide appropriate financial product advice that is in the best interests of investors.’