At least $20 billion will be siphoned from SMSFs to industry funds within a year if Labor’s franking credit policy is implemented, according to asset management firm Realm Investment House.
The $20 billion exodus is based on Parliamentary Budget Office projections that anticipate 25 per cent of listed shares held in SMSFs will be transferred to large public offer funds if the franking credit refund rules change.
“Given the recent pattern of cash flows relating to APRA (Australian Prudential Regulated Authority) funds, following the Hayne Royal Commission, industry funds stand to benefit in the transition. We infer that Industry Funds stand to receive over $20 billion in funds from SMSFs in 2019-20,” Realm Investment House partner Ken Liow said.
The investment house predicted the outflow of monies from SMSFs to APRA-regulated funds could be more significant should trustees revise more than just their allocations to listed equities in response to Labor’s proposed policy
“If SMSFs also transfer some part of their other arrangements as well, we believe that over $100 billion will move from SMSFs to APRA funds,” Liow explained.
“If the policy is implemented, pension-phase SMSF investors will be encouraged to transfer their arrangements to fast growing superannuation funds where they will still be able to receive value for their franking credits,” he concluded.