SMSFs have been giving the green-light to become serious property
investors.
Fear, uncertainty and doubt (FUD) are what stops most of us from doing
things, even though there are occasions where we know we need to do something.
Money to provide for our future is one such thing that we know we need
to do something about, but many of us, put it off for too long because of FUD…
or we are too busy.
Recently the Murray Financial Review commissioned by the Govt. created
FUD around SMSFs because it proposed that self-managed super funds should be
banned from borrowing to invest in property.
That proposal seem quite strange because borrowing to build wealth is an
excellent way to maximise the growth on what, for most of us, is limited supply
of surplus funds (the money left after paying taxes and living).
So smart investors only borrow to buy safe assets, and property is
probably the safest.
But what they were saying was if you want to try to maximise your somewhat
limited superannuation money, then you can’t.
Given that they don’t want to pay us a pension, that didn’t make sense.
In my opinion the original idea was that we didn’t want people taking
gambles with their superannuation. They wanted to make sure people only invested
in safe assets… like the stock market. (You would have to wonder how that is working
out for most people!)
It made no sense to me; property has been a consistent performer over
the years particularly long term, which your superannuation is. Property is
about as safe as you can get, hence the expression ‘safe as houses’.
So that was the recommendation. But now the government has rejected
that idea.
Last week, Assistant-Treasurer Josh Frydenburg said:
“In the final report of the financial system inquiry, which the
government commissioned David Murray to prepare, he recommended a complete ban
on limited recourse borrowing arrangements in SMSFs.
“I want to emphasise that we have been considering this recommendation
very carefully but flag that we want to make sure the approach we take is
proportionate to the risks that have been identified.”
I find that just about everything he says needs a translation, so most
agree that translated means “The ban was a sledge hammer to crack a nut so it’s
not going to happen”.
We know from survey data that people with SMSFs have a keen interest in
property, both residential and commercial. So now the door is open for them to
get serious.
Obviously we’d like to help.
So this is a good news story. SMSFs are on train to be a major force in
Australian property.
A WORD OF WARNING THOUGH: Beware of the self-proclaimed SMSF experts/specialists.
From what I have seen of them some are ex-Financial Planners that have seen an
opportunity to make a quick buck from this seemingly complicated financial
structure. Generally they charge an absolute premium for providing no better
advice than you can get from your Accountant or existing Financial Planner. It’s
not that complicated, the rules while different are not hard to learn.
The idea of an SMSF is to make money for your future, not to give it to
someone else for their future.
If you would like to know more please feel free to give us a call…
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