The trend for investors to borrow through their self-managed superannuation (SMSF) to invest in property is steadily increasing, La Trobe Financial said.
Estimates now show that around seven per cent, or in excess of $26 billion, of all SMSFs are now held in unlisted property.
Since changes to the Superannuation Industry Supervision Act in 2007 clarified the rules around borrowing and allowed super funds to borrow under a limited recourse borrowing arrangement, borrowing by super funds had been on the increase.
“This growth is continuing, to some extent, fuelled by the turmoil in the equity markets,” La Trobe Financial vice president of lending Iain Pepper said.
“[It is also] because lenders are making more products available and partly that trustees realised the leverage and tax advantages such arrangements brought,” he said.
Post-retirement, investors pay no tax on either capital gains if it is sold, or the rent if the investor continues to hold the investment, on properties bought within a superfund, the financial services company explained.
Before retirement, capital gains and rent earned by the SMSF are taxed at 10 per cent and 15 per cent, respectively.
The Australian Taxation Office data confirms that over the last 3 years almost 100,000 new funds have been established.
