NRAS properties in SMSF put under ASIC's spotlight
Have you seen advertisements stating that you could use your superannuation to purchase a property using NRAS and receive '$100,000 tax free'?
If so, ASIC is warning that they are well aware of a number of SMSF promoters including misleading statements in the advertisements about the grants that may be available under the National Rental Affordability Scheme (NRAS). If you've seen the above, that's one of the ones on their list.
Warning consumers about advertising that promotes the use of SMSFs to invest through NRAS, a government-run scheme that offers direct payments and tax offsets for building and leasing a property to low/moderate income earners 20% or more below market value, ASIC said that many of the advertisements are not presenting a balanced message.
Advertisements should be making it clear that not everyone is eligible to participate in the scheme. They should also be explaining the likely fees associated with purchasing, tenanting and managing properties purchased from NRAS-approved developers, and the 20% below market rent expected.
To receive the total financial incentive of $100,000, consumers will need to remain in the scheme for a minimum of 10 years.
SMSF investors should be aware of the following points:
- 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.
Source: ASIC
ASIC commissioner Greg Tanzer said that they want to ensure balanced messages that comply with the law are being used to recommend NRAS properties through SMSFs.
"It is important that ads are clear, accurate and balanced, especially when consumers are looking for investments for their long-term retirement," 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," he said.
To check whether the person or company you are dealing with is NRAS-approved, the Department of Social Services publishes a monthly report online with this information.
They will also generally need to hold an Australian financial services licence. You can check ASIC's public register of AFS licensees/authorised representatives also online.
