Is SMSF Lending Living on Borrowed Time?

The Australian bureau of statistics (ABS) has decided to include SMSF debt, alongside all other personal and investment debt, when calculating the national ‘debt to income ratio’.

This inclusion of SMSF debt pushes Australia to 200% – a milestone number and one of the highest ratio’s in the world!

In simple terms, this means that we have twice as much debt as income.

Reaching 200% is not a good thing, to state the bleeding obvious!

So why has the ABS included SMSF lending now, just as the extra SMSF debt takes the nation to the unenviable 200% ‘milestone’?

Is this merely a coincidence or is the timing intentional by the ABS or Government?

Was there any intention behind creating extra headlines linking SMSF debt directly to the nation’s extremely high debt to income ratio?

Could the Government be lining up the ducks to enable a smooth transition to end SMSF gearing to purchase property prior to the next election?

Interestingly, this is already a Labor policy, not a Liberal one.

But then again, the last budget was labelled a quasi-Labor budget.

If done well, (EG quality asset chosen that aligns with your overall superannuation investment plan) borrowing to purchase within SMSF can be a great strategy.

If executed poorly on the other hand, (EG purchased inappropriate property pushed by spruikers) our long time concern, based on anecdotal evidence, is that a lot of Mums and Dads are going to be left  with underperforming residential properties sitting within their super fund come retirement.. What’s more, these properties often will make up the lion’s share of the superannuation value and income. This could cause a range of issues!

Also, as the government would be well aware, this legislation has resulted in another $24 billion invested into the residential property market and counting!

Further fuelling increased property values since the SMSF gearing legislation was invoked in September 2007.

Watch this space……

 

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By |2018-03-19T11:15:17+00:00January 25th, 2018|

About the Author:

David Johnston
David is the Founder and Managing Director of Property Planning Australia, author of ‘How to Succeed with Property to Create your Ideal Lifestyle’, co-author of ‘Property for Life – Using Property to Plan Your Financial Future’ and a widely-published media commentator. With more than 20 years of experience, David is passionate about educating others to make informed, and ultimately, more lucrative property investment decisions. David established Property Planning Australia in 2004 – with the vision to educate and empower Australians to make successful property, mortgage strategy and money management decisions.  Property Planning Australia’s operations have earned acclaim and national industry awards for its unique fusion of property planning, education, money management, mortgage strategy and risk management. All supported by multi award winning customer service.