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SMSF Borrowing Is Safe…For Now

Investors can still use limited recourse borrowing to buy properties (both residential and commercial) in their Self Managed Superannuation Funds.

This is following the Federal Government’s rejection yesterday of the Murray Reviews’ proposal to ban self-managed superannuation funds from borrowing to buy property.basket shopping egg portfolio diversify basket buy retire income money saving super

The government has rejected the argument, saying it may be an important issue in the future but is not now, preferring to monitor what is happening rather than prohibiting it.

Treasurer Scott Morrison said yesterday there was insufficient evidence to support an immediate ban on borrowing:

“The information collected on this doesn’t lead us towards that conclusion at this point.”

Interestingly the government accepted virtually all of the other recommendations of the expert panel behind last year’s Financial System Inquiry.

The inquiry had three main issues to deal with:

  1. The safety of our banking system in the light of the global financial crisis,
  2. The increasing importance of the superannuation industry to our financial system as a whole, and
  3. How new technologies and related innovations might impact the system.

Inquiry chair David Murray and his colleagues focused heavily on superannuation, since this sector has become a major part of the financial system.

The banks weren’t so lucky

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As expected, the recommendation in David Murray’s FSI to require banks to hold more capital was endorsed.

We’ve already started to see the impact of this with a number of the big banks raising capital through share issues and by increasing interest rates.

The bottom line is that these prudential requirements will create a sounder banking system but will cost shareholders and customers, as those with a Westpac mortgage found out last week.

Of course before you decide to buy a property in your SMSF, please seek appropriate independent advice.

There are strict rules about advising on this financial product.



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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'SMSF Borrowing Is Safe…For Now' have 3 comments

  1. Avatar for Property Update

    October 21, 2015 @ 7:41 pm Scott

    Oh I can only imagine what chaos that would cause if the proposal to stop SMSF purchasing at this point in time…… melt down springs to mind….

    Negative gearing and 50% CGT discount have to go first…..

    http://www.macrobusiness.com.au/2015/10/hockeys-last-negative-gearings-gotta-go/

    How’s the wealth effect feel now???

    Reply

    • Avatar for Property Update

      October 21, 2015 @ 8:46 pm Michael Yardney

      Scott, why a meltdown? Stopping new purchases in SMSF would not make prices fall.

      Thanks for the macro business link. I’ve been observing there predictions for 5-6 years. have you noticed how wrong they’ve been

      Have you realised how much you would have lost out if you’d listened to them and sold up your properties in 2011. Even if prices fall 15 % you’d still be way ahead

      Reply


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