Businesses that hold a commercial property in their superannuation funds are facing uncertainty about the future of the rules and legislation which govern loan structures.
A popular use of this leveraging strategy is business owners housing a commercial property within their fund, and then using the premises to conduct their business.
This is a way for businesses to use the superannuation environment to plan for their retirement, as they are not afforded superannuation guarantee payments.
The 2014 Financial System Inquiry, chaired by former CBA boss David Murray, recommended a ban on borrowing in superannuation. In 2017, Labor said that it supported the proposal to ban SMSF lending.
This has advisers to the business community, like Hewison Private Wealth’s Chris Morcom, concerned about the future of the strategy for his clients.
At the moment, it’s unclear how borrowing arrangements will be treated.
“One of the issues I have... is that if you go off and make a significant investment decision such as to buy a property for your business premises, it’s not something you do for the short term. Generally, those financing arrangements are for a fairly significant time frame,” Mr Morcom said.
“If there’s going to be no grandfathering of those arrangements, then that could be a real problem,” he said.
Although the uncertainty is troubling, Mr Morcom advises that businesses shouldn’t make any changes to their strategy until policy moves are confirmed and passed.
“We’ve seen enough times where the government of the day hasn’t been able to get proposed policies, let alone the opposition, so I think there’s a fair bit of water to go under the bridge before we can have some certainty around these measures,” he said.
“History is littered with policy proposals that never actually got legislated.”