What is a Self-Managed Super Fund?
A Self-Managed Super Fund (SMSF) is a private superannuation fund, regulated by the Australian Taxation Office (ATO) that you manage yourself.
Set up costs and annual running expenses can be high, so it’s most cost-effective if you have a larger superannuation balance.
A common reason for starting a SMSF is greater access to a range of investments. Through an SMSF, you can invest in shares, term deposits, assets such as antiques and artwork, and property. Investing in property requires a SMSF loan.
Major Providers Cease to Offer Self-Managed Super Fund Loans
AMP has joined the big four banks by ceasing to offer new SMSF loans for residential or commercial properties. The exits from this market by major providers come in an environment of rising regulatory concerns and falling property values that has seen many recent changes to this controversial sector.
Current Market Conditions Have Raised Concerns
There has been a rise in scrutiny by regulators concerned about the surge of SMSF investors borrowing large sums of money to invest in property. SMSF borrowing for property has grown from $2.5 billion in 2012 to more than $25 billion in 2017. More than 1.1 million Australians now have a SMSF, and they make up almost 30% of the $2.7 trillion super sector.
Amid changing market conditions that include falling house prices and an increase in the difficulty of finding tenants for rental properties, SMSFs become vulnerable to the threat of large capital and income losses in a possible housing downturn.
Whilst existing SMSF loans in the market will continue, they will be subject to tighter regulations and controls such as preventing switches to interest-only repayments.
Contact Me if Looking to Invest Within a SMSF
There are many lenders that continue to offer SMSF loans. If you are looking to set up a SMSF for property investment or are considering property investment within an existing SMSF, please contact me to discuss the changes in the market and how they may impact you.