The SMSF Professionals’ Association of Australia (SPAA) has welcomed a new report into serious and organised investment fraud in Australia as a timely reminder of the risks investors face from organised crime.
Graeme Colley, SPAA director of educational and professional standards, says the checklist for investors to avoid investment scams recommended by the report should be “compulsory reading for every investor”.
“This report by the Australian Crime Commission (ACC) and the Australian Institute of Criminology (AIC) not only outlines the risks investors face, but, significantly, suggests what investors should do to avoid being caught up in fraudulent schemes,” he says.
“With the Trio scam a recent memory, this report, which got valuable input from 12 other government agencies, estimates that organised fraud activity resulted in losses of $113 million between January 2007 and April 2012, and this figure is likely to be conservative.
“It’s not rocket science. Indeed, what the report articulates in this regard is plain commonsense. But as we well know, investors often fail to follow these steps.”
In Colley’s view, investors too often fail to check a number of sources to ensure the legitimacy of the investment before putting their money in.
“The need to always get independent financial advice before investing and to ensure anyone selling an investment has a valid Australian Financial Services Licence… [these] are all simple procedures to follow to find out if an investment is on the level,” he says.
“In addition, investors need to diversify where they invest and be particularly wary about any overseas investment. The old adage, if it sounds too good to be true, then it probably is, is worth remembering.”
SPAA seeks ATO clarification
In related news, SPAA has called on the Australian Tax Office to clarify the tax issues on when a superannuation income stream starts and ends.
“It’s important the ATO finalises its draft ruling sent out for public comment last year as it has the potential to impact significantly on members’ benefits,” says Colley.
“Certainly there is the potential for significant additional income tax to be paid if the trustees get it wrong.
“SPAA understands a decision was to have been made by last month, but nothing has been forthcoming despite numerous submissions on the issue to the ATO.
“The link between the income tax law and the SIS legislation has always technically been a tenuous one as the fit has some uneasy aspects at best, and the delay in finalising the draft ruling (TR 2011/D3) has not helped matters.”
The ruling revolves around what constitutes the provision of a pension in a fund and whether the income of the fund supporting that pension is taxed at 15 per cent or is tax-free.
Colley says there is also uncertainty around the date from which the ruling would take effect, with the draft ruling stipulating July 1, 2007.
“Backdating to July 1, 2007 may be fine for funds that have happened to have done it right, according to the Commissioner’s ruling,” he explains.
“However, for those who have not met the requirements of the ruling due to other quite valid interpretations of the law, the result could be a very expensive exercise.”
