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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

ATO figures show SMSF borrowings not exponential

25 January 2014

The latest ATO figures suggest that the growth in SMSF borrowings have not been out of control as some commentators have reported but have grown steadily over the five years to 30 June 2012.

Director, Technical and Professional Standards, of the SMSF Professionals’ Association of Australia (SPAA) Graeme Colley has commented that, “although the ATO figures show there has been a solid growth in borrowings over this period, there is no suggestion it is either “exponential or irresponsible”.

Colley added that, “what has to be understood is that although SMSF borrowings increased from 1.1% a year in 2008 to 3.7% in 2012, this percentage still only amounts to 3.7% of the total SMSF asset pool of more than $500 billion…and hardly suggests that trustees are borrowing without giving it due consideration.” Colley assured that, “in dollar terms, the average amount borrowed was $122,000 in 2008 compared with $357,000 in 2012.”

While SPAA’s head of education Liz Ward, recently labelled the criticism of SMSF trustee investment in residential property as ill-founded, Colley has highlighted that, “borrowing has not increased significantly since 2012 and remains a very small proportion of the total value of loans made by banks and other financial institutions. The lending criteria placed on superannuation funds that borrow for limited recourse borrowing arrangements is more stringent than loans taken out by individuals for residential property and commercial property – a fact often overlooked.”

Colley says it’s also interesting to note that 90% of borrowing takes place in the accumulation phase rather than pension phase. “This is the time when cash flows of funds from investments and contributions are positive and generate income to service any outstanding debt.”

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