Bad news surfaces today for property investors

By Katarina Taurian

April 21 2017
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Property investors who use their superannuation to fund a purchase through a self-managed fund may find themselves in hot water under a Labor government.

The Labor Party is reportedly looking to abolish the right for self-managed super fund (SMSF) members to purchase property in their funds.

According to ATO statistics, SMSF investment in residential housing is estimated to be worth approximately $12 billion.

This represents some 0.18 per cent of the Australian housing market, which is worth about $6.43 trillion.

Peak bodies in the SMSF space, such as the SMSF Association, have come out swinging in defence of limited recourse borrowing arrangements, which is the structure that allows SMSFs to leverage their superannuation savings for property investment.

“SMSFs investing in residential property, whether through borrowing arrangements or not, should not be singled out from other investors when looking at policy solutions to improve housing affordability,” said the association’s chief executive Andrea Slattery.

“The idea that SMSFs have plunged into property investment in recent times also is not borne out by the statistics, with SMSF residential property holdings, both geared and ungeared, being consistent between 4-6 per cent of total SMSF assets in recent times,” Ms Slattery said.

“In addition, there is scant evidence to support the notion that the use of LRBAs by SMSFs pose a systemic risk to superannuation or the broader financial sector.”

This is the latest in a string of suggestions put forward by both political parties to address the housing affordability issues plaguing Sydney and Melbourne.

In particular, there has been a flurry of kite flying with a proposal to allow first home buyers to access their superannuation to fund a housing purchase.

The argument for this proposal, which crops up every two years or so at budget or election time, is that superannuation is being used to pay off mortgages in retirement anyway, and owning a home should be considered in retirement income policy. You can read more along those lines here.

The argument against the proposal note that the fundamental issues plaguing the housing market come back to supply restrictions in capital cities such as Sydney and Melbourne, and allowing investors to access more cash to fund a purchase will simply fuel the market if supply remains untouched. You can read more about this here.

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