The number of SMSFs with limited recourse borrowing arrangements (LRBA) has remained relatively static over the past five years, with the ATO reporting around 11 per cent of funds use them and they account for just under 7 per cent of all asset holdings.
The figures are drawn from the ATO’s recently released “Self-managed superannuation funds: A statistical overview 2021-22”, which showed the percentage of SMSFs with an LRBA had shifted little, climbing from 10.9 per cent in the 2018 financial year to 12.1 per cent in 2019/20, before declining to 11 per cent in 2021/22.
The figures for the percentage of all SMSF assets represented by LRBAs has also remained relatively constant, increasing from 6.7 per cent in 2017/18 to 7.4 per cent in 2019/20 before falling to 6.7 per cent in 2021/22.
In dollar terms, SMSF assets owned through LRBAs were worth $56.3 billion in 2021/22, down from $57.3 billion in 2020/21, but up from the $45.2 billion reported in 2017/18.
In dollar terms, SMSF assets owned through LRBAs were worth $56.3 billion, down from $57.3 billion in 2020/21 – their highest point in the five years covered by the data, but up from the $45.2 billion reported in 2017/18.
The ATO noted of the $56.3 billion of assets held under LRBAs, 97 per cent or $54.4 billion was related to real property, which was split between residential at 55 per cent or $30.9 billion and non-residential real property at 42 per cent or $23.5 billion.
The report also highlighted a sharper increase in the size of direct investment in residential property investment, which grew by 31 per cent over five years from $35.1 billion in 2017/18 to $46.1 billion in 2021/22, while direct investment in non-residential real property grew by 29 per cent from $64.8 billion in 2017/18 to $83.5 billion in 2021/22.
As a result of this increase, SMSF investment in residential real property – directly and through LRBAs – was $69.7 billion in 2021/22 or 0.7 per cent of the total Australian residential property market of $9983.4 billion, according to the Australian Bureau of Statistics.
LRBAs were the focus of regulator concerns during the term of the previous government, which asked the ATO and Council of Financial Regulators – made up of the Australian Prudential Regulation Authority, Australian Securities and Investments Commission, Reserve Bank of Australia and Treasury – to review potential risks posed to the superannuation system by the arrangements.
However, two successive reports released in March 2019 and November 2022 found there was no systemic risk to the superannuation system, but risks could be reduced for individuals who use LRBAs in inappropriate ways.
