Financial advisers warn that Australian property investors may use self-managed super funds to avoid proposed changes to capital gains tax and negative gearing [1].
This trend is significant because it suggests investors are seeking loopholes to maintain tax advantages, potentially risking their retirement savings in the process. Experts said that shifting assets into these structures to bypass government reforms can leave individuals vulnerable to financial instability and fraud [1, 2].
Sarah Abood, chief executive of the Financial Advice Association of Australia, said some investors are already looking to set up self-managed super funds to make use of exemptions to the new CGT regime [1]. The proposed reforms aim to reduce the tax advantages currently available to property investors, prompting a search for alternative legal structures that might still offer exemptions [1].
However, the shift toward these complex funds is not without risk. Abood said these settings expose potential investors to scams [1]. Beyond the threat of fraud, there are concerns that investors may end up with low fund balances if the strategies fail, or the costs of management outweigh the tax benefits [2].
The appetite for these funds is already evident in recent data. The total number of self-managed super funds has climbed to a record 661,000 [2]. This represents a seven per cent increase [2].
As the Australian government continues its parliamentary inquiry into these tax settings, the pressure on the superannuation system grows. The movement of private property wealth into superannuation funds changes the risk profile of retirement savings — moving them from diversified portfolios into concentrated property holdings [1].
“Some investors are already looking to set up self-managed super funds to make use of exemptions to the new CGT regime.”
The surge in self-managed super funds indicates a tension between government efforts to cool the property market through tax reform and the desire of investors to protect their yields. By moving assets into superannuation to avoid capital gains tax, investors are essentially gambling their retirement security on property exemptions, which may increase systemic risk if the property market volatility affects a larger portion of the national superannuation pool.
