“In the 1990s, business real property used to have a 40 per cent limitation in terms of total assets and that later changed and went to 100 per cent.”

“There's going to be stages in life where the farm [or business] isn't going to pay the bills once they move to retirement phase, so it's juggling those things collectively.”

However, he said the government also needs to understand that with the new Division 296 tax, it is now layering in new things that small businesses may have made decisions on historically and that are now materially going to affect those decisions.

“In a long-term sense, it wouldn't make any sense, ideally for someone to be so asset-centric in making that decision.”

He continued that from 2010, when the LRBA rules were changed, there was scope to expand that further to allow for leverage inside superannuation as well, but it was not usually the “end game” of funds to hold 100 per cent of their portfolio in business real property.

“So, my fund might be 100 per cent or 98 per cent invested in commercial property, but by the time I retire, I don't expect to still be 100 per cent in commercial property.”

“I would be expecting over time, either through the fact that we've bought it or if we've used borrowings, that we would be firstly, extinguishing borrowings and then diversifying ourselves out with the contributions and income that that asset derives and end up with a far different weighting to what maybe originally entered into.”

Dunn added that there is an acknowledgement that a fund may end up in a single asset class with a view that ultimately, from the investment strategy perspective, that's not where it’s going to “land” by the time its members hit retirement or start the drawdown phase.

“That's not a perfect science by any stretch, but that would be the approach. If you look at the investment strategy rules, and it's obviously very different in SMSFs because it's more regulatory compliance driven, a lot of that stuff is built into the guidance about the fact that if you do have much heavier asset concentration in classes, you're thinking about how to work your way through that to have things that are more evenly spread over the different classes.”

“You're still getting that benchmark return that the trustees are trying to achieve for its members.”