Speaking to InvestorDaily, Bendigo and Adelaide Bank senior manager, technical and research, Julie McKay said the new levy may see investor sentiment towards margin lending and gearing strategies grow more positive as investors look to reduce taxable income.
Ms McKay said margin lending will be attractive because it enables investors to “fix and pre-pay interest a year in advance so that tax deductions can be brought into the current financial year”.
“Not only do you lock in your rate but you bring forward the tax deductibility to the current year, so all the deductible interest that you would have paid over the year, you bring into the current financial year as a deduction,” she said.
Ms McKay said margin lending is also suited to the three-year timeframe of the levy as it is ideally a medium- to long-term strategy.
More broadly, she said that investor and financial planner demand for margin lending products was returning following a period of “overreaction to some of the negative [news] stories about margin lending” that emerged in the aftermath of the global financial crisis and collapse of Storm Financial.
This aversion to gearing strategies over previous years has resulted in some investors “missing out on opportunities offered by the share market”, Ms McKay said.
The comments follow a roundtable discussion co-hosted by the Bendigo and Adelaide Bank Leveraged Equities business and InvestorDaily sister title ifa, in which client-facing financial planners expressed their views on the appropriateness of margin lending in the current climate.
Phillip Smith, a partner at regional NSW accounting and financial services firm Cutcher and Neale, told the roundtable event that a “return to a normal approach” to investment and debt levels has fuelled a resurgence of interest in margin lending.
“Post-GFC there was a bit of fallout there from people that over-extended themselves in the margin lending space,” Mr Smith said. “People understand there is a long-term game here, not a short-term gamble, which may be where margin lending was previously perceived.”
However, fellow roundtable participant Darren Wright, a financial planner at Prescotts, said many investment professionals are still suffering from the “hangover from the significant stress of having margin calls”.
