In a column originally published in the Australian Financial Review, Mr Howes drew comparisons with the beginning of the global financial crisis, claiming SMSFs risk creating a speculative, debt-fuelled housing bubble.
“SMSF owners can borrow to purchase investment properties and avoid capital gains tax once they reach 65. Business owners can transfer their commercial properties into their SMSF without penalty,” Mr Howes said.
“This dramatic tilting of the field towards unproductive, speculative investment has had a dramatic and predictable result. Already, $75 billion worth of property is held in SMSFs and analysts expect this to boom in the next few years.”
These comments by Mr Howes were likely endeavouring to apply the “blowtorch” back onto the SMSF sector, Mr Dunn said, as the Coalition begins to focus on bringing more transparency into the governance of APRA-regulated funds.
“The likely loser out of this process with the inclusion of independent directors? Yep, you guessed it: union sector representation,” he said.
“SMSFs have become disruptive to such an extent that the rest of the superannuation industry is fighting hard to counter the revolution and at the same time trying to redefine its purpose with a growing number of individuals becoming engaged with their retirement savings,” Mr Dunn added.
In his column, Mr Howes also indicated the number of SMSFs with borrowing has tripled in the past four years, with the average loan size now being $357,000. However, Mr Dunn told SMSF Adviser that it is “grandstanding” to write about the tripling of borrowing when it has started from a base of practically zero.
“The level of negative gearing is nowhere near the levels some individuals seek to obtain outside of super – and at least with LRBAs they are limited recourse against the fund… the bank may expose the individuals personally with guarantees though,” he added.
Mr Dunn previously told SMSF Adviser there needs to be a greater understanding of the ‘hype’ in property and the ‘action’ taken by trustees.
“Much of the commentary in recent times appears inflammatory towards what is a well-functioning SMSF sector and doesn’t put into context the facts around the supposed boom of property within SMSFs,” he said.
PAT Mea culpa – sorry.
Howe is correct that About $75B of freehold is held in SMSFs of which less than $20Bill is residential.
His quoted words are centred on residential (& lets face it that is where 90% of property speculators go)further that is where most of the borrowings are directed. Yet he quotes the total property $’s that do include commercially activities – not “towards unproductive, speculative investment” as he suggests.
Lord Stockton, whilst I would never want to defend someone like Howes, you need to understand the numbers you are reading.
Howes is referring to the property held via SMSFs, that he suggests is $75 billion.
The ATO stats to which you refer relates to the amount of borrowings held by SMSFs.
Don’t play the same misleading games the unions do.
Emkay, you nailed it in two lines […] there is so much kicking and screaming from Muppets like Howes. They see their golden goose taking flight.
Howes real concern is losing control over what he and his ilk deem to be THEIR cash cow. What he fails to realise or more likely give even a passing interest in, is what the investor wants to do.
“Already, $75 billion worth of property is held in SMSFs and analysts expect this to boom in the next few years.
OR
One could read the Stats released by the ATO which state for yr 2012 only 3.7% of a SMSF total asset pool of just over $500Bill (or say $20bill).
Only a cynic would say ‘believe the ATO before you listen to let alone believe a union leader.’
Why is a self-opiniated, self promoting person such as Howe got his nose out of joint about SMSF’s. Maybe he should look closer to home with the union members and possibly himself who actively acquire highly and negatively geared investment properties purely for the sake of potential capital gains and immediate tax deductions.
I would welcome the opportunity to debate his comments in a proper public arena where the facts will outweigh the rhetoric.
SMSF owners can borrow to purchase investment properties and avoid capital gains tax once they reach 65. Business owners can transfer their commercial properties into their SMSF without penalty, Mr Howes said.
How wrong can you be, what about the stamp duty and CGT that gets paid now on those properties, when only a theoretical change of hands has taken place.?
Any person with a functioning pre-frontal lobe will see literally every critic of borrowing has a vested interest in dragging criticism towards the one sector that’s eroding their market share.
Graham Colley already proved the statistics do not support the noise being made.
Want to curb the property bubble? Try starting with the 190,000 pa immigration numbers coming to Australia and overseas speculators
Business owners can transfer their commercial properties into their SMSF without penalty, Mr Howes said. Someone should mention capital gains tax to Mr Howes, brought in by his hero Mr Hawke 30 years ago. Contribution limits hardly make this a big end of town option and and why should there be a penalty for contributing significantly to the funding of your own retirement?
Aaron is spot on with his criticism of the comments by Paul Howes. As a registered SMSF Auditor, I can see the involvement in SMSFs entering into LRB funding.
Paul Howes is attempting to stop the reduction in Union control. What he should be doing is looking at why people are leaving industry funds. Why did I recently make such a move, not to a SMSF, but a commercial Fund? Because the service was poor and the options available far too limited. I now have an investment where I can control the investments, similar to a SMSF. Paul Howes, stop whinging and start lifting your game if you want to be in the marketplace.