Self-managed super: SMEs to expedite gearing of business premises

SME owners are likely to accelerate existing plans to gear their business premises through their self-managed super funds after renewed debate about whether to bar future superannuation gearing, say advisers to SMSFs and small-medium businesses.

Business owners are among the biggest supporters of self-managed super with superannuation gearing to acquire business premises becoming an increasingly popular strategy.

The recent interim report of the Australian government’s current inquiry into the financial system, chaired by David Murray, is calling for views about whether superannuation gearing should be prospectively prohibited.

“If allowed to continue, growth in direct leverage by superannuation funds, although embryonic, may create vulnerabilities for the superannuation and financial systems,” the inquiry observes.

The inquiry’s final report is scheduled to be delivered to the Treasurer by November 14, although it is not known how long the government may take to react to its final recommendations.

SMSF specialist adviser Peter Crump says: “Where there is a hint that an investment opportunity may be closing, people who have been thinking about it should stop vacillating and make a decision – one way or the other.”

Crump, superannuation strategist for financial advice company ipac South Australia, believes that the financial inquiry’s call for views about the possible future barring of super gearing may prompt SME owners who have already been considering gearing their premises to focus their attention.

And Crump says good advisers have a responsibility to alert clients who had been discussing the gearing strategy with them about the possible impact of the financial inquiry.

“I think as advisers, we have a responsibility to keep our clients fully aware; otherwise we have let them down,” he adds. Crump is chairman of the SMSF Professionals’ Association of Australia (SPAA).

SMSF auditor Martin Murden believes the raising of the possible removal of superannuation gearing is a “potential trigger” for SME owners who had been examining whether to gear their business premises through their SMSFs to reach a decision.

Murden, a director of SMSF consulting and auditing with the Partners Wealth Group and author of How to invest in property through your self managed super fund, says the financial inquiry provides something of a deadline for SMEs to make up their minds.

And Naree Brooks, a partner at PwC Private Clients, makes a similar comment: “If SMEs had been thinking about gearing their premises through their SMSFs, the Murray inquiry may bring forward the decision making.”

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