The Tax Office has raised the alarm about a strategy some Australians are using for property which could put their retirement savings at risk.
Since 2007, it’s been possible for Australians to leverage money in their self-managed superannuation funds (SMSFs) to invest.
Property has been the most popular choice by far – 95 per cent of all loans in SMSFs are for the purpose of property investment.
The Tax Office is concerned by a growing group of funds which allocate the majority of their superannuation savings to property, labelling it a “concentration risk” for Australian property investors.
Concentration risk is compounded by falling property prices across Australia and struggling rental yields in some capital cities. The superannuation fund is required to service the debt, which requires decent cash reserves and equity.
The ATO will contact SMSF investors which it believes are at risk of compromising their retirement savings based on their property strategy.
“Trustees are legally obliged under the SIS Act [Superannuation Industry (Supervision) Act 1993] to consider diversification and liquidity risk as part of their investment strategy,” said assistant commissioner Dana Fleming.
“Where we identify potential concentration risk we will write to trustees ensure they adequately understand and mitigate the associated risks,” she said.