Timms said in the past few weeks there has been an increase in the number of people seeking advice about the encroaching deadline.
“I have never seen anything like it. I mean, it feels like it’s created this urgency on people not wanting to miss out, or seeing the window closing on this strategy that they can use to grow wealth inside of super,” she said.
She continued: “We’re seeing a lot of people reaching out saying this has been part of their plan and asking what they need to do to get this done before this hard deadline?” she said in an interview with Ausbiz.
“[They’re asking] do they have time to set up a super fund because they have always wanted to do this? We’ve seen a lot from people who’ve been thinking about it. We’ve also seen a lot from people who work in the industry saying, ‘Oh, this window is closing for our business, and we need to make sure we’re getting as many of these through as we possibly can’.”
However, the urgency is also posing “huge” risks, Timms said; even simple risks like getting documentation wrong, which can cause stamp duty problems, as well as getting naming protocols wrong and not getting documents signed correctly.
“There’s different rules across different states. People are investing from Western Australia into Victoria, and from the Eastern states back into Western Australia, and there’s different rules across all states,” she said.
She added that she finds the hard deadline particularly concerning because people may not be buying the right properties.
“Is this actually a smart strategy, or is it reacting to an opportunity that might be missed? Are people going to actually make smart decisions, or just make the decision they have to make because we’ve only got around two weeks left?” she said.
The rush to invest is also coming at a time where broader property market values are falling and Timms said that is another major concern.
“Property values are dropping. Are they going to drop further? Are people going to be buying in at an inflated price? As we’re expecting to see properties fall because of this legislation, it just feels a little rushed and does raise a lot of red flags,” she said.
“For a lot of people this is the only way that a superannuation fund can borrow to buy property. Superannuation funds traditionally are not allowed to borrow, and this is the only way that you were ever able to borrow to buy residential property.
“It’s a way of leveraging growth when you don’t have the money to buy the asset outright, so it really is for people that have done the work on a smart retirement strategy. It’s not a strategy used by people who have multiple properties. These aren’t the multi-property owning, ultra-wealthy. These are younger people looking to try and grow their superannuation, looking to be engaged in it.”
Timms said that although the Government’s reasoning in introducing the ban was to try to “balance out” the needs of the property market, it’s disappointing to see this window closing.
“For our clients, it really comes back to, ‘What’s their strategy?’ If we can’t now leverage into that, if that’s not where you really want to go, what are the other investment opportunities available to you? For some, that might mean that self-managed super is not really the place for them to retire. It might mean that they want to look at different investment structures,” she said.
Furthermore, Timms said with the 10 August deadline looming, there is also some unethical behaviour “creeping” into the market.
“I certainly don’t want to besmirch an industry because we work with fantastic buyers agents, but we have also seen some trying to push these deals through whether or not it’s right for the client,” she said.
“For some people, they’re really only talking to a buyer’s agent who may be trying to drive them in a particular direction, and that’s raising some concerns about whether this is the right strategy for that person? Has this all been considered, or is this just someone wanting to push you at a particular property?
“That’s always been the concern with having these kinds of products available in self-managed super – are people operating in the best interests, or are they getting the right advice for the individuals, or is there another reason why we want to go down this path?”