The number of SMSFs employing limited recourse borrowing arrangements (LRBA) to acquire property has noticeably increased in the past few months as investors begin to rebalance their portfolios towards growth assets, according to an industry platform provider.
“Initially, when the ATO (Australian Taxation Office) clarified the rules around borrowing to invest we didn’t see a lot of take up straightaway, but we’ve now seen that slowly change,” OneVue head of strategic relationships Brett Marsh told selfmanagedsuper.
“The rules changed at obviously a very awkward time in the market when growth assets started to get on the nose, but growth assets are a lot more interesting right now.”
Marsh said the OneVue platform had witnessed some significant fund movement since July last year away from defensive assets and towards growth allocations.
“The total funds managed on our platform has been going up very steadily and quite markedly in some months, but the level of passive assets has actually started decreasing in dollar terms as well as percentage terms,” he said.
The jump in popularity of LRBAs among SMSF members has coincided with another recent development Marsh has recognised, and that is the provision of advice in regard to direct and syndicated property from financial planners.
“We’re seeing advisers trying to differentiate their businesses and one of the differentiating factors is property advice. Often times an adviser will partner with someone to be able to offer a different value proposition for their clients away from vanilla shares, term deposits or managed funds,” he said.
“Some of that is driven by the more recent hefty limitations around how much people can put into super. So sometimes smart strategies can be around the use of LRBAs and related-party loans to get more funds into super that are not captured by the contributions caps.
“It probably is a trend and we’ve seen that start to happen now, whereas a year ago I hadn’t seen that happen at all.”