DIY super experts back changes to borrowing rules

Two experts on self-manger super funds have supported changes to rules around the use of instalment warrants in DIY super funds, saying the Government’s proposals will provide more certainty to the sector.

Federal Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, has moved to clear up two major problems surrounding the use of instalment warrants through proposed legislative amendments.

The first change involves the tax treatment of customised property warrants, such that a capital gains event will not be triggered when an instalment warrant is paid off and the property is transferred from the instalment trustee to the SMSF trustee.

DIY super expert Dan Butler from Melbourne law firm DBA says the change is a welcome one as it clarifies who the real owner of a property is for tax purposes and confirms that SMSF trustees will not be inadvertedly hit with a CGT bill.

“That’s very positive because it takes out a number of areas where there was confusion.”

The second proposed change clarifies the rules around who can recommend instalment warrants. Only holders of an Australian Financial Services Licence will be able to recommend the warrants, meaning real estate agents, property brokers and some accountants will no longer be able to do so.

Philip La Greca, technical services director at SMSF advisory firm Multiport, says the new rules are a response to concerns that unscrupulous property spruikers may have been using instalment warrants to push property onto DIY super fund trustees.

“We now have a clear idea of the proper qualifications and licensing requirements for those who can advise on these things.”

Butler also supports the changes, but suggests they could add a bit more fuel to the fight between financial planners and accountants.

While the new changes will mean financial planners will be giving out most of the advice about instalment warrants, Butler points out that the complex tax issues surrounding warrants will need to be addressed by accountants.

“Financial planners are not quailed to give tax advice, accountants are not licensed to give financial product advice unless they have AFSL. We’ve got all these ill-equipped people who potentially can’t give tax advice.”

La Greca also notes there is a three-month window before the new rules come in, and hopes that there will not be a spike in unlicensed people trying to promote instalment warrants before the changes come in.