Hewison Private Wealth is urging the corporate regulator to take “urgent action” against property spruikers and mortgage brokers who take advantage of limited recourse borrowing arrangements (LRBAs).
The ATO has found that as of June 2014, assets held by SMSFs using LRBAs have increased to $8.7 billion.
Hewison Private Wealth managing director John Hewison said while LRBAs can be an appropriate investment strategy for some high-net-worth individuals, investors are at risk from property spruikers and mortgage brokers tapping into the “lucrative revenue stream”.
Mr Hewison said some brokers and spruikers are showing “complete disregard” for the individual circumstances of each investor.
“Younger investors with minimal account balances are being encouraged to borrow large amounts of money in order to buy properties in their super funds,” Mr Hewison said.
“Further, middle-aged individuals, who should be risk averse and preparing for retirement income streams, are also being led down the path of gearing property,” he said.
Mr Hewison stressed LRBAs are suitable for individuals who incorporate the structure into their strategy without compromising the sole purpose test, maintain appropriate levels of liquidity and flexibility and incorporate a legitimate debt reduction program.
“However, as history has repeatedly shown, legitimate investments are compromised by a select number of operators who abuse the system and cause havoc for investors,” Mr Hewison said.
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