The latest SuperConcepts “SMSF Investment Patterns Survey” has revealed an increase in the number of limited recourse borrowing arrangements (LRBA) among SMSF trustees during the 2016 September quarter.
The analysis showed the use of LRBAs among SMSF investors rose during the quarter as indicated in a 7.4 per cent increase in property loan allocations from 70.2 per cent to 75.3 per cent.
At the same time, financial asset loans dropped by 16.9 per cent.
Further, the study found there was a rise from 37.3 per cent to 38 per cent in all direct property holders using gearing.
“The ATO’s safe harbour guidelines around limited recourse borrowing arrangements has led investors to wind up some of their related-party loans in relation to financial assets and focus gearing on property,” SuperConcepts technical and strategic solutions executive manager Phil La Greca said.
Other survey findings indicated SMSF trustees had upped their allocations to hybrid securities for the quarter from 6.5 per cent to 7 per cent.
“The continued drop in interest rates has given trustees no choice but to seek income elsewhere. The new hybrid capital offer from ANZ has led to increased interest in hybrids, but investors are proceeding with caution as the security generally carries significant risk,” La Greca noted.
SuperConcept’s statistics also showed contributions continued to decline during the quarter, with the average contribution inflow per funds dropping from $10,750 to $3040.
La Greca attributed that trend to ongoing uncertainty about the proposed legislative changes in the area, but was optimistic the trend would change in the coming months.
“Following the government’s September announcement around significant adjustments to proposed superannuation changes, we expect this trend to be reversed and contribution levels to start rising again,” he said.
“With the current $180,000 after-tax contribution cap, and the three-year $540,000 bring-forward rule remaining until 30 June 2017, we’re likely to see a significant uplift in the level of after-tax contributions before the end of the financial year.”
The survey reflects the investment patterns of around 2900 funds administered by Multiport that hold about $3.1 billion in assets.