There were concerns regulatory changes announced at the federal budget last year would prompt a rush among SMSF trustees to sell the commercial property assets held in the structure. But this eventuality has not transpired.
In fact, as Steven Bennett, head of the direct business of leading Australian property group Charter Hall and Brenda Hutchison, partner, superannuation, advisory and audit, TAG Financial Services, explained in their conference session, SMSFs and property, the flow of capital from SMSFs into property assets has continued to grow despite the new rules.
There is demand from the SMSF sector for commercial property assets with a key attraction being the strong and stable income streams. Additionally, it allows trustees to diversify away from residential property and helps trustees enhance the overall diversity of the structure, something with which SMSF trustees can find challenging.
This session exploreed the three main property investments an SMSF trustee considers. These are: commercial premises linked to a related business, residential property, and unrelated commercial property.
Presenters also examined the tips and traps to be aware of when investing in property within a SMSF and provided an overview of how the legislative changes applying from 1 July 2017 will influence where a SMSF invests in property. A worked case study walked participants through the practical implications of the key trade-offs, including cash flow, tax and death benefit implications.
The session also touched on why unlisted commercial property assets can add a certain amount of regulatory flexibility to an SMSF and at the same time achieve exposure to property.
With the ever-increasing interest among SMSF investors in property assets this was an especially popular part of the conference.