Self-managed success: Building a nest egg

When it comes to building wealth for retirement, the choose-your-own-adventure approach of a self-managed super fund (SMSF) may not be for everyone. But for an increasing number of Australians, it’s an option with plenty of upside.

The number of SMSFs in Australia reached 616,400 in March 2024, comprising 1.1 million members and more than $932 billion in assets. That’s about 24 per cent of the $3.9 trillion currently invested in super. Compared to March 2023, these figures represent a 3.3 per cent increase in the number of SMSFs (596,370), a 2.7 per cent increase in the number of members (1.11 million) and an 8.8 per cent increase in the number of assets ($856 billion).

While listed shares continue to be the dominant asset class that Australians look to when building their SMSF, an increasing proportion of SMSF trustees are turning their thoughts to property investment.

According to the latest ATO statistics, residential property within SMSFs accounts for approximately half the value of commercial property holdings, with both asset classes making up around 14 per cent of total SMSF assets.

Commercial property represented 9.7 per cent ($91.9 billion) of the total allocation of assets. By comparison, residential property represented 5.3 per cent ($49.9 billion) of the total allocation of assets. A key driver of increasing interest in purchasing property through SMSFs is that traditional superannuation returns “may not have been meeting investment expectations” in this changing economic environment. An SMSF structure also offers “significant protection” for property assets, “along with compelling tax advantages during both the accumulation and pension phases of the fund”.

SMSFs continue to be established by both PAYG and self-employed members, with the primary focus being their future retirement goals and preferences.

Refinancing an exisitng SMSF loan could lead to significantly lower monthly repayments, improving the funds cash flow

One of the trends driving growth in commercial property investment, is the attractive nature of SMSF limited recourse borrowing arrangements (LRBA's) which allow an associated party – such as a member’s own business – to lease the commercial property at market rent. It's generally agreed this arrangement makes strong financial sense, as business owners can benefit from owning their premises and building wealth, rather than paying rent. As a result, it's expected commercial property assets within SMSFs will remain on a strong growth trajectory.

SMSF lending is more complex than other property lending so it’s essential to use a mortgage broker, accountant, solicitor or conveyancer who understand SMSF property purchases. If purchasing property in your super is something you're considering, or would like to discuss, Etairos Finance can help you whether it's a residential or commercial property. We can also help you refinance to obtain a better rate or new loan features on your existing SMSF loan. Call Jaeneen on 0402 684 199 to discuss.