The following is for your perusal and information only:-
Undisclosed auction results preventing property investment wisdom: Mark Armstrong
By Mark Armstrong
Wednesday, 31 October 2012
Page 1 of 2
We live in a crazy world where we are encouraged to invest and fund our own retirement but are not provided with adequate information or legislative protection to assist us to do so.
People who are looking to enter the property market are forced to rely on patchy information, as disclosure of sale results is not mandatory and access to past sales is hidden from view. In addition consumer protection laws for property investors are almost non-existent. As the wheels of the property market begin to turn, this is the reality property investors face.
Currently there is no obligation for real estate agents or vendors to disclose sale results to the public. For years the industry has hidden behind privacy concerns, but consider this, even a property sold via a public auction can be undisclosed. If you are watching the auction you would know the result but because of privacy concerns the vendor can elect to hide the result. Have you ever heard of anything so ludicrous?!
On any weekend as many as 10% to 20% of all auction results are not disclosed. Imagine if the board of BHP were to keep that much information hidden from the market place. There would be uproar, and rightly so!
Furthermore, the historical growth of an individual asset is a key piece of information anyone buying property needs to know to make an informed decision. However, what the property last sold for is usually very hard for the average punter to find. Again imagine if you were looking to purchase some BHP shares but had no access to historical values. It would be very difficult to work out fair market value.
But it gets worse for property investors. Legislation administered by the Australian Securities and Investment Commission (ASIC) provides protection for investors in shares, managed funds and super. Financial planners are required to consider each client’s personal and financial situation, investment knowledge and risk tolerance before giving recommendations on strategies or products. They must also provide a rationale for the recommendations, and disclose fees and commissions they will receive if the client acts on their advice.
Investors in direct property, however, receive no such protection from the nation’s investment watchdog. This is a glaring anomaly given that, according to the Tax Office, around 1.5 million Australians declare rental income for investment properties.
The ASIC Act’s rationale for excluding direct property from the definition of what constitutes a ‘financial product’ is that — unlike shares, super and managed funds, where investors entrust day-to-day control to a third party to generate a return — direct property investors retain direct control of decisions and returns.
The fact that direct property investors retain control of their assets doesn’t mean they are any more likely to make sound investment decisions. On the contrary, the absence of a third party increases the need for inclusion in ASIC’s safety net.
Lack of regulation enables practitioners to sell investors a product or concept under the guise of providing advice without taking into account an individual’s personal or financial circumstances.
The regulator’s attitude to direct property as an asset class is clearly out of step with the way it’s being used as an investment in the wider community. It’s time the legislation was amended to recognise direct property as a financial product and give property investors the same level of protection and access to information as those holding other asset classes.
The time is ripe for the nation’s corporate watchdog to step up to the plate. When investors turn their attention to property, they’ll be in a better position to make informed investment choices and less prone to the fallout from lousy investment advice.
Mark is a director of Property Plan, which provides independent analysis and tailored advice to investors and home buyers.
& previous article of interest:-
The best way for property investors to avoid paying land tax: Ed Chan By Ed Chan Land tax is a state-based tax, meaning it gets charged by the individual states; therefore the rules, conditions and land tax thresholds differ from state to state. Generally the first property bought in most states will be below their land tax threshold, such as an apartment (unless it’s a really expensive property), and subsequent properties bought in the state will be added to the first for assessment purposes. Generally by the second or third property the total land value will be pushed above that Sstate’s land tax threshold. To eliminate paying land tax completely one could simply buy a single property where the land value is below the threshold and the second in another state and so on, which means you start fresh with a new land tax threshold in each state. So, effectively you could have eight properties without paying land tax. However having said that, it's not a wise investment principle to invest solely for tax reasons. Tax reasons should never drive your investment principles. It should be part of the consideration, but never the only consideration as there other key factors to take into account. For example, it may be land tax effective to invest in a particular state, but that state could be at the peak of its property cycle, which makes that a poor investment. To get an estimate of what the land value is one can look at the Valuer-General notices attached to council rates. Land tax is self-assessed. In most states you will not receive a land tax notice from the Office of State Revenue reminding you of your obligations, and it's up to you to voluntarily self assess and lodge a land tax return. What happens if you don't lodge a land tax return? Well, no one will know in most of the states; however if you are unlucky you may get found out in a random audit and or when you decide to sell the property the buyer will want land tax clearance before taking possession of the property because land tax liability is transferred with the sale of the property. In that case you will need to back pay all the land tax owed plus penalties and interest. This could be quite significant. So it's always best to lodge a land tax return, even if you are below the land tax threshold. Lodging a land tax return gets you registered in the system and you will receive a nil assessment notice each year which will avoid the situation where you were unaware that your land value one year had climbed above the land tax threshold and you were liable to pay land tax; the non payment attracts penalties, fines and interest. |
Best regards,
 | Linda J. & Carlos Debello, LJ Gilland Real Estate Pty Ltd Tel: (07) 3263 6085 | Mobile: 0409 995 578 & 0400 833 800 http://www.ljgrealestate.com.au |
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