The number of limited recourse borrowing arrangements (LRBA) used in SMSFs has clouded the level of investments in property, which is likely to be the second largest asset class used, according to an SMSF technical expert.
Accurium head of education Mark Ellem said the ATO SMSF quarterly statistics, including the most recent report released for the June quarter 2021, used a mixture of asset classes and investment structures when reporting assets held in SMSFs, but an examination of underlying assets indicates property equals one-fifth of all SMSF investments.
“With this mix of asset categories and asset structures, we see the third top category for investments [after Australian shares and cash] is unlisted trusts, but that is not a category, it is a structure – that’s how the assets are held – and we don’t see what the underlying assets are,” Ellem said during a recent webinar.
“Similarly, for LRBAs, that’s a structure and the underlying assets are generally property but could be other assets,” he added, noting Australian property assets in SMSFs were spread across three categories: non-residential real property (9.75 per cent), LRBAs (6.93 per cent) and residential real property (5.27 per cent).
“If we combine those categories and put all the shares together – Australian, international, listed, unlisted – and all the property together, we see real property jumps ahead of unlisted trusts [at 12.47 per cent of invested assets] to 15.08 per cent and shares remains top at 30.48 per cent [with cash and term deposits second at 18.4 per cent].
“Unlisted trusts and LRBAs [at 6.93 per cent] are at fourth and fifth position, but as asset structures, not asset categories.
“For LRBAs we do get the underlying asset breakdown from the ATO SMSF annual statistics and from the 2018/2019 figures we see that out of the money invested in LRBAs around 96 per cent of that is in property.
“If we take that proportion and add it to the figures seen in the June quarter statistics, we see that real property is about 20 per cent of total assets in an SMSF and in second position.
“It would be helpful if we had these statistics reported on a pure asset category basis and looking at the underlying assets where a fund holds them indirectly via an interposed entity, so we could compare them back to our own SMSF clients and their investment strategies.”
