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SMSFs and NRAS: A dangerous combination?

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The Australian Securities and Investments Commission (ASIC) has issued a warning to investors about advertisements that promote using your self-managed super fund (SMSF) to invest in government schemes.

The regulator has noticed advertising which encourages people to use their SMSF to buy into the National Rental Affordability Scheme (NRAS).

The NRAS offers direct payments and tax offsets to investors who build and lease housing to low and moderate income earners at a rate at least 20 per cent below market value.

Some ads that have caught ASIC's attention claim consumers using their SMSF to purchase property within the scheme could receive $100,000 tax free.

However, ASIC warned many of the advertisements are misleading and fail to provide important information about the scheme.

“Consumers need to be cautious when presented with claims that appear too good to be true, and should do their research before investing,” ASIC commissioner Greg Tanzer said.

A number of the ads fail to mention the $100,000 incentive is only available after 10 years' participation.

Moreover, the ads make no mention of the below-market rental returns, eligibility requirements, and fees associated with the scheme.

“Consumers should think carefully about how long they intend to hold the NRAS property, ensure they understand the income and capital potential of an NRAS property and satisfy themselves that it fits with their investment purpose,” Mr Tanzer said.

The NRAS aims to encourage large-scale investments of 100 houses or more. However, individual investors can access the scheme via an approved participant.

Investors should be aware that approved participants are not required to pass on any incentives, ASIC said.

Only people holding a financial services licence should give advice on SMSF investment, the body cautioned.

A full list of licence holders is available from the ASIC website.

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