Buoyed by the clarification from the central government, a higher number of SMSFs are likely to invest in properties, feels Jonathan Street, CEO of commercial lender Thinktank. An article on the online magazine Your Investment Property sheds light on the topic.
Government rejects FSI’s recommendations
The government has been rather sharp in rejecting the recommendations of Financial System Inquiry (FSI) which talked about prohibiting Limited Recourse Borrowing Arrangements availed by the SMSF investors for purchasing properties.
Since the government’s release in late October, there has been a definite escalation in number of investors looking to buy property through their SMSF.
SMSF lending likely to double or triple up
Commercial lending firms believe that the volume of transactions may double or even triple up over 2016, now that the way is clear. Given the current low interest rate scene, there are many benefits of investing in property through SMSF. Seen in the light of long-term management of wealth, the combination of low interest rate environment and facilities offered by an SMSF-enabled purchase can certainly make investors happy. By facilities, the article means no tax or little tax payable on rental income and no CGT upon sale (of course, depending on the phase the fund is in). Add to it positive cash flow.
You can read the original article here.
Investors feel free to catch the almost-missed property boat
Many investors feel they have already missed the property boat as Australia gives hints of hitting the tail-end of its property cycle. Prices are already near their peak. The investors were thinking twice about using LRBA transactions, fearing backlash if the government read the FSI recommendations positively. Now that the case has turned out to be just the opposite, the SMSF investors are looking to cash in on property purchases before they “actually miss the boat”.
Abolishing LRBA for SMSF always a tough call
It always had to be a tough call to abolish LRBA transactions for SMSF-enabled properties. The government read the threat but felt that prohibition was an action quite disproportionate to the threat involved. So, the long and short of it is that we knew what the government was likely to decide about the issue a long way in advance.
