From the editor: They’re at it again

09-Nov-2017

By Darin Tyson-Chan

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Superannuation is a sector of the Australian financial make-up that seems to be undergoing constant scrutiny and potentially constant change, whether the public knows it or not.

For example, the Productivity Commission is currently in the process of examining two aspects of the superannuation system – considering alternative default models and assessing the competitiveness and efficiency of the current structure.

Now this all sounds good and well and the intention of improving what we have in the retirement savings world would seem to be a noble objective.

Of course, all reviews such as these call for submissions from the various parts of the superannuation community and this is where it often breaks down.
This is because the process opens up a lobbying opportunity for some parties, which then argue for change purely in the name of self-interest as opposed to a genuine passion to enhance the existing framework.

To be fair, often it is only natural to make assessments from a slightly selfish point of view as human bias can be instinctive.

But I think we need to draw the line when self-interest crosses a line and manifests itself in denigrating and questioning the legitimacy of other parts of the retirement savings landscape.

I say this because these situations always seem to unearth another attack on SMSFs and I can safely say always without any substantial evidence to support the said argument.

The Australian Institute of Superannuation Trustees (AIST) is the latest organisation to perpetuate this phenomenon.

Its submission attacks the validity of SMSFs on several fronts, but the one I find most offensive is its claim, and an old chestnut, that SMSFs are over-inflating the residential property market and in turn contributing to the housing affordability crisis in Australia in a detrimental way.

Time and time again this argument has been refuted, but it doesn’t stop it being trotted out regularly to scare Canberra into imposing greater restrictions on people who run their own super funds.

So again, the facts of the matter are the ATO statistics show SMSF asset allocations to commercial property far outweigh allocations to residential property.

The statistical report the regulator published for June 2017 showed the portfolios of funds with balances of $5 million to $10 million had a 3.06 per cent allocation to residential property, but had a 12.11 per cent allocation to non-residential property.

Similarly, funds with assets in excess of $10 million had invested 1.55 per cent of their monies in residential property and 11.14 per cent in commercial property.

These figures hardly represent a mind-blowing channelling of funds toward residential real estate.

Looking at the situation in dollar terms highlights the situation more graphically. In December 2016, leading property data provider CoreLogic valued the Australian residential property market at $6.7 trillion.

At the same point in time, ATO statistics reported SMSF residential property holdings to be $26.7 billion in total. It means SMSFs accounted for only 0.4 per cent of the total value of the national residential property market.

It seems pretty logical the stats alone would be enough to quell the argument. But the catch is the AIST has linked its case to the affordable housing situation – something every politician currently wants to address right now.

We’ve already seen the downsizing measures introduced for superannuation contributions in some sort of token effort to go some way to solving the problem.

This initiative should ring alarm bells for all SMSF trustees because if the mob in Canberra chooses to take this latest release of hot air seriously, more restrictions and more change for the sector might result, and that’s something that would be completely unnecessary and undesirable for the space.

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