Negative gearing causes “excessive risk” and is inappropriate in a superannuation environment, Tria Investment Partners has warned.
Tria’s managing partner Andrew Baker told SMSF Adviser that negative gearing maximises risk-on assets which are already risky, and could cause “catastrophic” losses within SMSFs.
“We have already seen plenty of examples of catastrophic losses with SMSFs where members have got [themselves] into heavily geared property schemes,” he told SMSF Adviser.
“It just introduces excessive risk… there are certainly sensible strategies but it is far too easy for them to go wrong,” he added.
Mr Baker said it was a “big mistake” to permit SMSFs to borrow following policy changes made by the government.
“[It] basically opened the dam gates to essentially allow any kind of borrowing on any kind of asset, which led us to where we are today,” he said.
“It is an area of concern because this is where you tend to get losses arising from when you combine gearing with real estate or exotic assets.”
Also speaking to SMSF Adviser, AMP chief economist Dr Shane Oliver said negative gearing only works if you “eventually” make a profit from your investments.
“You are not going to make any money if you are constantly losing a lot of it,” he said.
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
23 Jun 2017Trustees reminded of ‘positive’ CGT news as EOFY loomsBy Katarina Taurian
23 Jun 2017SMSF practitioners told to reassure clients in 30 June lead upBy Miranda Brownlee
23 Jun 2017SMSFs warned on 30 June cut off for electronic transfersBy Staff Reporter
22 Jun 2017Westpac veteran and SMSF exec set to departBy Staff Reporter
22 Jun 2017ATO sets compliance targets for auditors in 2017-18By Miranda Brownlee
22 Jun 2017CGT relief still plaguing trustees, says former ATO execBy Miranda Brownlee
- view all
Trustees reminded of ‘positive’ CGT news as EOFY looms
A capital gains tax (CGT) issue that was causing confusion in the industry has been cleared up by the ATO, and professionals are being remin...read more
SMSF practitioners told to reassure clients in 30 June lead up
With the focus predominantly on super members with above $1.6 million, it may be worth practitioners informing clients unaffected by the ref...read more
SMSFs warned on 30 June cut off for electronic transfers
With a significant portion of Australians missing the 30 June cut off last year when making non-concessional contributions, Colonial First S...read more
- view all