SISFA welcomes ATO property ruling
The Small Independent Superannuation Funds Association (SISFA) has welcomed the Australian Taxation Office's (ATO) recently released draft ruling which will allow self managed super funds (SMSFs) to make improvements to properties purchased through limited recourse borrowing.
Commenting on the ATO's clarification of SMSF borrowing rules, Michael Lorimer, chair of SISFA, said it was a practical outcome for trustees that allowed for greater flexibility when purchasing property.
"It is a practical outcome for trustees and allows for greater flexibility in buying property where the opportunity to add value can enhance the retirement outcome for fund members," he said. "I have found that many trustees wanting a residential investment have had to primarily consider new, 'off the plan' residential developments where the need for improvements was not an issue.
"This practical change will allow for consideration of older properties that can be sensibly upgraded."
Lorimer added that he did not harbour concerns that SMSF trustees would overcapitalise properties as a consequence of the new ruling.
"When SMSFs started to grow in numbers and the first round of SMSF lending was allowed, we heard howls that trustees would go broke and lose money because they weren't in proper managed funds," he said. "That has simply not been the case and we have seen in ATO figures that SMSF portfolios are similar to standard balanced portfolios.
"They have not become over geared property portfolios and we can't see that this practical change in treating property investments will cause any mayhem."
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