Before investing in any managed investment scheme, always consider the following:
Is there a Taxpayer Alert or valid product ruling for the managed investment scheme?
Check our website for all Taxpayer Alerts that have been issued to date plus a full listing of product rulings listed by product type, number or year.
Does the investment scheme manager receive commissions for the number of investors they sign up?
Commission structures should be outlined in the product disclosure statement or prospectus. You should be wary of investment schemes where high levels of commission are paid to managers (in excess of 10-20% of your total outlay).
What are the financials arrangements and structure of the investment scheme?
Investigate these carefully - you should be wary of finance arrangement that involve 'round robin' financing and limited or non-recourse loans where the loan only needs to be repaid out of future profits of the venture and/or the finance provider has limited or no recourse to your assets.
Is your return guaranteed?
A guaranteed return involves no risk. It is possible that the only benefit of the investment is the notional tax benefit.
Is the dominant purpose of the entering the investment scheme to avoid tax?
Be aware that if the dominant purpose for entering an investment scheme is to avoid tax, the Tax Office can later disallow the deductions.
Does the investment scheme have a current product disclosure statement or a current prospectus lodged with Australian Securities Investment Commission (ASIC)?
You can check this with ASIC
Is the investment scheme promoter licensed by ASIC?
For a list of licensed promoters visit the ASIC website at www.asic.gov.au
Disclaimer: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in this article is for guidance only and should not be relied upon without obtaining professional advice having regard to your specific circumstances.
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