Clarification likely to see SMSF investing grow, says commercial lender

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The head of a specialist commercial property lender is expecting an increase in the number of people looking to use self-managed superannuation funds (SMSFs) to invest in property after the practice’s future was clarified by the Federal Government.

The government last week released its response to the Financial System Inquiry, and in the response rejected a recommendation that direct borrowing for limited recourse borrowing arrangements by SMSFs be prohibited.

Jonathan Street, chief executive officer of commercial lender Thinktank, told Your Investment Property Magazine’s sister publication Australian Broker that there has already been an increase in people looking to invest through SMSFs since that announcement.

“This rapid escalation in activity is most likely the release of some pent up demand which had been on hold pending the government making an announcement on the future of SMSF borrowing,” Street told Australian Broker.

Street told Australian Broker that Thinktank is expecting a possible tripling of SMSF related enquiries over the next year.

“We presently expect this interest will extend out over the remainder of the year and into early next year while from this point forward, we anticipate there will be a further wave of business owners and investors who look to take advantage of owning property in an SMSF now the way is clear,” Street told Australian Broker.  

“Our own expectations are for volumes to double or triple over the next year.”

While Street said the clarification about investing through an SMSF is likely to help its popularity grow, he also told Australian Broker that there are numerous benefits that come with investing through an SMSF, especially considering the current interest rate environment.

“If correctly structured, in retirement there will be limited or no tax payable on rental income received, nor capital gains tax upon sale. Prior to then and while their business or a tenant occupies the property, the rent paid back to the SMSF can generate a high level of return and will help pay the loan down,” Street said.

“At the current low interest rates, this can prove to be a very powerful approach to long term wealth management and wealth creation.”

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