Wholsale Investor Definition

[Asheam]

Hi Guys

Quick question for the accounting experts out there in relation to the definition of a sophisticated or wholesale investor.

It's defined by ASIC as net assets of $2.5mil or "gross income" of $250 for the previous two years. Gross income is given its ordinary meaning as it is not defined.

If I have $100k of salary and receive $155k of "gross rent" would I meet this definition?

That is to say that I receive $155k of rental income however after paying all expenses / mortgage etc I might only make a 10k "net income" from the properties.

Cheers

 

[westminster]

I am by no means an accounting anything (more likely an accounting dunce) but I doubt it would include salary. It would be $250k income from investments. I will leave it up to those with accounting qualifications to say how that is calculated

 

[Terry_w]

This is a legal question and the definition is not defined by ASIC but under the Corporations Act and regulations.

see
CORPORATIONS ACT 2001 - SECT 708
http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s708.html

CORPORATIONS REGULATIONS 2001 - REG 6D.2.03
http://www.austlii.edu.au/au/legis/cth/consol_reg/cr2001281/s6d.2.03.html

 

[Propertunity]

Are you asking because you want to be considered a "sophisticated or wholesale investor"? Or is it because you want to take action against a lender or financial adviser which would offer various consumer protections if you were not considered to be a "sophisticated or wholesale investor"?

 

[Asheam]

Sorry Terry, I did mean to say the corporations act not ASIC, the pages you linked was where I had my information from.

In the future I'd like to be classified as a wholesale investor PropertyUnity, nowhere near that amount now.

The question still stands though, it refers to "net assets" and "gross income". net usually meaning A-L or I-E whereas gross is usually just the assets or income side.

Therefore could you count your rental income without the associated expenses in reaching the $250k gross income figure?

 

[Asheam]

So after some additional reading, gross income isn't actually defined anywhere. It is up to the accounants judgement in how they apply the corporations act definition.

Can any accountants who have signed off these certificates advise how they have treated gross income?

 

[Redwood]

edited

Cheers Ivan

 

[sanj]

An accountants certificate means nothing imo - believe me

Cheers Ivan

When it comes to being able to participate in investments only open to sophisticated investors surely an accountants certificate means everything?

 

[Terry_w]

Since the phrase isn't defined it takes its ordinary meaning. You should search for case law to see if there are any cases where this is discussed. An accountant wouldn't be signing such a certificate without legal advice.

 

[Terry_w]

Here is ASIC's take
http://asic.gov.au/regulatory-resou...ertificates-issued-by-a-qualified-accountant/

 

[Ace in the Hole]

Why not shoot an email to your accountant to confirm.
I asked mine about this a little while ago, being curious about it and pretty sure we'd qualify.
He said he can sign off an Accountant Certificate for Sophisticated Investor for us.

Also worth noting that investments exclusive to sophisticated investors do not necessarily mean good returns. Those investments might be complicated in structure or high risk.

 

[Asheam]

Thanks for the responses guys.

Terry, the ASIC link is definitely the most detailed source that I've been able to find. As I mentioned before it does seem that it comes under the accountants discretion of how they define gross income.

I had a search for case law on the topic but most of it seems to relate to the wholesale investors (investing 500k in a lump sum) which excludes them from requiring an accountants certificate.

When I used to work in accounting we did sign off a few certificates however these were usually met by the $2.5mil net assets.

Thanks for the caution Ace, I've been looking at the mezzanine funding scene and stand-a-lone investments into individual building projects. Quite healthy returns however you need to weigh up the risks.

Cheers