Uncertainty for unlisted and DIY instalments in super
The proposed changes to gearing rules in superannuation will open a “can of worms” for investors who use unlisted or DIY gearing in their super funds, said Alpha Structured Investments founder Tony Rumble.
Rumble was referring to Government announcements last week that suggested changes to the borrowing arrangements by superannuation fund trustees and amendments to the tax law.
“Although the changes confirm that some forms of instalment gearing can legitimately be used in super, they raise serious questions about unlisted and DIY gearing in super,” he said.
“Gearing products that aren’t listed on the ASX are now seriously in doubt.”
Rumble added that the proposed changes make it clear that the Australian Taxation Office (ATO) will be looking to limit deductions and to impose capital gains tax (CGT) on instalments users, unless the investor uses an ASX-listed instalment.
“The new rules make it clear that investors buying ‘traditional’ instalments are treated as if they are the owners of the assets within the instalment,” he said. “That means that they can claim tax deductions for interest expenses on the instalment loan, and they don’t have a CGT liability when they repay the loan. But the changes also clearly state that the ATO views unlisted and DIY instalments as potentially giving the instalment trustee an interest in the underlying asset — meaning that it’s not clear that the investor can claim a tax deduction for interest expenses, and also making it possible for the ATO to impose CGT when the loan is repaid.”
Recommended for you
As advisers risk losing two-thirds of FUA during the $3.5 trillion wealth transfer, two co-founders underscore why fostering trust with the next generation is vital to retaining intergenerational wealth.
As advisers seek greater insights into FSCP determinations, what are the various options considered by the panel and can a decision be appealed?
Amid the current financial adviser shortage, advice firm Link Wealth is looking to expand its financial literacy program for high school students across the country.
TAL Risk Academy has updated its range of ethics courses to help financial advisers meet their CPD requirements following adviser feedback, including interpreting FSCP determinations.
