Many very large Master Public Superannuation Funds and the media have been pushing propaganda that SMSF were investing huge amounts of money into property thus pushing up residential property prices causing a property bubble.
We experienced the same propaganda many years ago when SMSF’s were first introduced and the large Super funds supported a heavy negative marketing against their establishment. But rather than succeeding in this scare campaign we experienced the opposite with a huge uptake of SMSF at the time.
This popularity has continued on.
“The SMSF industry has taken huge market share off the Master Superfund industry over the years and hence understandably they have attempted to fight back.”
The Australian Taxation Office has recently published data that shows that this is in fact, not the case.
The following data was published in the Australian on the 7th November 2016.
The ATO self-managed fund asset allocation statistics show that property represents 15 per cent of all SMSF assets — not that far away from the APRA-regulated fund allocation of 9 per cent to property.
But, residential property is only 4 per cent of all SMSF investment and represents only 0.4 per cent of the total $6.045 trillion Australian housing market. The total borrowings in SMSFs as of June 2016, was around $21bn or just over 3 per cent of total SMSF assets.
The biggest investment sector financed by borrowing was commercial property not residential. The ATO statistics confirm that SMSFs do not invest in a single asset class on a major scale. Portfolios are relatively diverse with real estate investment forming part of the fund’s overall asset allocation.
For the record here is how the self-managed funds invested in the 2015-16 year:
- Australian listed shares — 30 per cent
- Australian residential property — 4 per cent
- Australian commercial property — 11 per cent
- Cash & term deposits — 26 per cent
- Overseas investments in total — 1 per cent
- Listed & unlisted trusts & other managed investments — 19 per cent
- Debts & loans — 2 per cent
- Other investments — 7 per cent
Growth in property investment has been generally steady over recent years.
Commercial property is a more significant SMSF asset class than residential property because of the ability of SMSF trustees to be able to transfer business properties from a related party into their SMSF in line with the contribution limits.
A large number of self-managed funds are run by current or retired professionals, small business owners and self-employed individuals. Based on ATO statistics, in four of the eight years from 2006-07 to 2013-14 year, SMSF returns outperformed all other alternative superannuation arrangements.
But in recent times self-managed funds have not been at the top. APRA statistics for the 2014-15 year show that the return for SMSFs after expenses (excluding contributions) was 5.7 per cent. This compares to non-SMSF returns of 8.5 per cent for the same period. The self-managed funds with 26 per cent of their assets in cash and term deposits were hit by falling rates because most of the term deposits were for one year or less.
Ed Chan – Non-Executive Chairman & Co-founder at Chan & Naylor.
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