SMSFs have shifted cash into shares post June 2017 rule changes

SMSFs have been shifting the cash contributed ahead of rule changes in 2017 into shares, while reducing property holdings, SuperConcepts has found.

SMSFs are holding less cash then they were a year earlier, according to the June 2018 SuperConcepts SMSF Investment Patterns Survey. The proportion of SMSF assets in cash and short term deposits dropped from 19.8% at the end of June 2017 to 17.3% in June 2018. However this may simply reflect the investment of contributions made late in 2016/17 rather than a change in investment strategy.

Contributions in the June quarter – generally the highest quarter for contributions – have returned to normal after the June 2017 quarter, which saw $8,623 in average contributions ahead of rule changes. Average contributions for the June 2018 quarter were $3,498, which is in line with the June 2017 quarter.

While cash held by SMSFs decreased over the year, investments in Australian shares increased from 35.4% to 36.6% at June 2018. Holdings of international shares also increased, from 13.1% to 14.4%.

“This really debunks the myth that SMSFs just put money in the bank and leave it there because we now have clear data showing they are active investors,” said Phil LaGreca, Executive Manager of SMSF Technical and Strategic Services with SuperConcepts.

“The data confirms that SMSFs are drawn to wanting control over their investment strategies and they are highly engaged in putting their money where they want it,” said LaGreca.

While investments in shares have increased, at the same time property holdings have fallen – from 19.3% to 18.9%.

“We’re seeing the start of a trend that will be sustained particularly as the residential market softens and property is becoming less available to SMSFs as an investment option,” LaGreca said.

“It’s not just residential though, we expect property allocations in SMSFs overall to continue falling as access to finance tightens and lenders start to increase their interest rates.”

Meanwhile SMSFs holding property using LRBAs has increased, from 40.7% of property holding SMSFs at 30 June 2017 to 42.1% at 30 June 2018.

By value, 58% of the property held by SMSFs in the survey was residential, with 42% commercial. But by number of properties 70% was residential and 30% commercial.

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