Heffron SMSF Solutions’ most recent “SMSF Borrowing Data Report” showed that while the number of limited recourse borrowing arrangements (LRBA) in place were on the rise, they were yet to reach what could be considered a significant level.
The data showed of the 1700 funds Heffron administered, 208 or 12 per cent had an LRBA in place. That compared with 7 per cent of funds with an LRBA in 2012 and 4 per cent in 2011.
The figures also revealed SMSFs still preferred to use an LRBA to acquire residential property, with 139 funds nominating the gearing strategy to purchase that type of asset compared to 69 funds that had borrowed to buy commercial real estate.
“There have been a lot of alarmist statements about the rate of penetration of borrowing in SMSFs without much data to support these statements. Our ‘SMSF Borrowing Data Report’ is designed to put some perspective about the number of SMSFs who have LRBAs in place,” Heffron head of document services Duane Pinches said.
“The data shows that the rate of growth in LRBAs is still quite small across all of our funds and this is also reflected in ATO data in relation to the whole SMSF industry, albeit which is only up to 30 June 2012.”
Pinches also emphasised the lower loan-to-value ratios associated with those loans and the fact they were limited recourse in nature should allay any major concerns over their exposure to property market corrections.
However, he said he was in support of greater industry regulation of the property sector.
“For the record, Heffron supports the call for greater regulation of the property industry, so the property advisers are forced to move into the AFSL (Australian financial services licence) regime if they want to promote SMSF borrowing structures to their clients,” he said.
