Labor targets SMSF borrowing in housing package

Self-managed superannuation funds (SMSFs) would be banned from directly borrowing for real estate purchases under a new package of economic measures announced by the Australian Labor Party (ALP) to help address the housing affordability crisis.

However the Shadow Treasurer, Chris Bowen, has already admitted that borrowing by SMSFs for housing purchases represents only a very small element among the many factors currently driving up home prices in Australia.

The ALP’s new policy approach will be formally announced later today but extensive pre-briefing of the media has revealed that the Federal Opposition intends imposing a tax on investors who leave properties vacant, a doubling of the application fee for foreigners who invest in homes and a restoring budget funding for a so-called “safe housing fund”.

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However it is the restriction on SMSF borrowing arrangements which will be of greatest concern to financial planners and their clients because, if implemented, it would represent a significant change in the current settings.

However the ban represented one of the major elements of the Financial System Inquiry not implemented by the Government.

Speaking to the media, the Federal Opposition leader, Bill Shorten suggested a ban on direct borrowing by SMSFs would “help cool an overheated housing market partly driven by wealthy self-managed super funds”.

He claimed this direct borrowing had “seen an explosion in borrowing from $2.5 billion in 2012 to more than $24 billion today”.

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Forget housing affordability impact! Anecdotal evidence would suggest SMSF lending for resi property is currently the biggest and most profitable strategy for dodgy spruikers, agents, accountants and planners. I have lost count of the amount of 'planning firms' engaged in the as there sole business line and the amount of business they are writing is huge (I'm talking multiple planners per firm doing 6+ meetings per day!)

Based on that alone the door should be closed immediately.

BB If we shut down things because of bad spruikers, does that mean we shut down the whole financial planning industry because some financial planners give poor advice (for example some bank financial planners who can only sell their own bank products). Don,t shut down the investment strategy target the unethical provider. Just to be clear I own two resi properties in my smsf and neither were through spruikers

To stop SMSF’s from borrowing to buy property, on the basis that it “will prevent the unnecessary buildup of risk in Australia’s superannuation system” is a complete lie and compounds my view that the system is rigged.

Let me explain why.

SMSF have $24 billion in LRBA property. Yes this has grown over the last 10 years, but still only represents less than 4% of all SMSF assets which are estimated to be $628 billion at December 2016 by the Australian Taxation Office.

But at the same time SMSF’s also have nearly $228 billion in listed shares and trusts.

Now my question to you. What is more likely to happen?

LRBA property falls to by 50% costing $12 billion. Or shares fall 5% and cost SMSF’s nearly the same?

I would bet my house on there is a bigger chance in the share market falling 5% sometime in the not too distant future, than residential property in Australia falling 50%.

So how is this policy stopping LRBA’s reducing the buildup of risk in the superannuation system.

It is not, it is only being made policy by Bill Shorten and the Labor Party so they can keep their mates the Unions happy (with their Industry Superfunds) and the powerful Banks happy (with their Retail Superfunds).

Bill Shorten and the Labor Party don’t care about the average person trying to beat the rigged system and create a retirement lifestyle they deserve. No they want to rig the system in favour of their mates.

And don’t get on the comment that SMSF’s through LRBA’s are causing the housing affordability issue.

Even if we assume all $24 billion is in residential real estate (which we know is not true), this is just 0.4% of the total Australian housing market of $6.7 trillion (yes trillion).

This is less than half of one percent. How can half of one percent drive prices for the other 99.5% of the market?
No way.

It is just another story by Bill Shorten and the Labor Party to con the people.

I say it again, Bill Shorten and the Labor Party are only trying to rig the system in favour of their mates (or maybe it is their masters).

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