Hitting SMSFs is not the answer to house price ‘crisis’

Once again, the politicians in Canberra are taking another swipe at self-managed superannuation
funds because they are an easy target.
But the Opposition’s policy to ban borrowing by self-managed funds won’t do much to take the heat
out of housing prices.
It is only one of a number of demand factors. Politicians on both sides should be focussed on the
supply side and finding ways to increase housing stock and reduce the pressure on prices.
In any case, the house price ‘crisis’ is largely confined to Sydney and Melbourne.
Labor’s plan is just another attempt to screw down the economic benefits of superannuation and
curb the success of self-managed funds, no doubt to the delight of the major industry funds.
The Government should not be tempted to pocket Labor’s policy. It has already done enough to
curb the growth of SMSFs, despite self-managed funds being the only sector of the
superannuation ‘industry’ that is actually delivering results by allowing people to be financially
independent in retirement and not reliant on pensions paid for by the next generation of taxpayers.
The policies of both the Government and the Opposition have shaken confidence in
superannuation by constant changes to the rules. Nobody can be sure that the super savings they
make today will still be there when they need them in the future.
One of the reasons self-managed funds borrow to buy shares and property is to enhance their
superannuation savings as governments have steadily wound back the amount of concessional
and non-concessional contributions they can make.
Relatively few SMSFs are geared – about five in every 100 – and only half of their borrowings go
into residential property. The other half is for commercial and industrial property, often linked to the
SMSF owner’s business.
For example, the owners of a car repair business may borrow via their self-managed fund to buy
the workshop from which they run their business. In this way, small business owners can grow their
business and better provide for their financial independence in retirement.
SMSF borrowings for non-residential property have no bearing on house prices.
ATO statistics show that in 2015 SMSFs had borrowings invested in property of $18.6 billion. Of
that, $9.4 billion was for residential and $9.2 billion for non-residential (commercial and industrial).
Borrowings for property amounted to just 3% of total SMSF assets.

SOURCE: SMSF Owners’ Alliance