SMSF practitioners must make the most of innovative strategies for residential real estate investments within SMSFs while gearing is still permissible and still favourable for this asset class.
NowInfinity director Grant Abbott warned delegates at the NowInfinity International Conference in Hawaii last week SMSF borrowing would either be a thing of the past or would remain the “big player in town” and move past property to include other possibilities.
“Borrowing is going to be gone or it’s going to be bigger than Ben Hur and will just be an accepted thing,” Abbott said.
“That’s something we have to put on our radars because if it’s going to be bigger than Ben Hur, we’re actually going to start to see it go into other assets – from property to exchange-traded funds, et cetera.
“That means in the next seven or eight years, we can really run hard at it or we just have to be always mindful of the fact that it may be banned by the government.”
According to the Australian Taxation Office direct property investments in SMSFs represented 3.6 per cent.
In the past year, SMSFs had grown by more than $60 billion, or $164 million a day, Abbott said.
He predicted that by 2020, there would be 800,000 SMSFs worth in excess of $1 trillion in assets.
“If you are not in front of the game, then it is going to be a torrid few years ahead and, more importantly, one of immense lost opportunity,” he said.
“It is important when you’re having a talk to your clients, about the use of gearing inside an SMSF, to tell then what we’ve got now may well be gone in the future; that your kids, like your parents, will never be able to borrow in their super.
“So generation X have a really good opportunity right now.”
He said innovative strategies resulted in higher pricing particularly when the wider marketplace had not caught on to them yet.
“It’s like with borrowing. I’ve been talking about borrowing since 2007 and now it’s still only $16.7 billion, but why is it just catching on?” he said.
“We’re hypothesising about what may happen, so we need to be in front of the curve.
“We’re here to be the early adopters or innovators on these things so that if it all comes down in a crashing heap, we’ll be there to help the clients and they won’t be our clients, they will be somebody else’s clients. So we need to build up some specialisation there.”
