ASIC warning on buying property through an SMSF

ASIC warning on buying property through an SMSF

ASIC is aware that there has been a sharp rise in promoters recommending investors either set up or use and existing SMSF to invest in property. S.911A of the Corporations Act 2001 (Corporations Act) requires any person carrying on financial services business in Australia to hold an Australian Financial Services (AFS) license or be a Representative of an AFS licensee. A person provides a ‘financial service’ if they provide ‘financial product advice’. Under S.766B of the Corporations Act, financial product advice is defined as:

  • a recommendation
  • a statement of opinion
  • a report of either of those things

This is, or could reasonably be regarded as being, intended to influence a persons decision in relation to a financial product. Providing financial product advice includes making a recommendation or a statement of opinion to a person to set up an SMSF to purchase property through that SMSF. This is because the vehicle through which the underlying investment is made is an SMSF and an interest in an SMSF is a financial product. Therefore, a person who makes such a recommendation or statement of opinion provides ‘financial product advice’ even where the underlying investment- ie property in this case, is no a financial product. If a person does not hold an AFS license or is not authorised by an AFS licensee, they can only provide factual information to consumers in relation to SMSF’s. ASIC has published Regulatory Guide (RG) 244 Giving information, general advice and scaled advice which explains the difference between factual information and financial product advice.

 

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