SMSF borrowings and other liabilities

At 30 June 2012, SMSFs had liabilities to non-members of $9.7 billion, equivalent to 2.2% of total SMSF assets. This consists of $6.3 billion in borrowings and $3.5 billion in other liabilities, 1.4% and 0.8% of total assets respectively (see appendix 1, table 15)

SMSFs are prohibited from borrowing money except in certain limited circumstances permitted under the SIS Act. These circumstances include limited recourse borrowing arrangements that meet certain conditions. Other liabilities are obligations the SMSF has to non-members that do not fall under borrowings

Over the five years to 2012, SMSFs with borrowings increased progressively from 1.1% of SMSFs in 2008 to 3.7% in 2012. The average amount borrowed also increased each year from $122,000 in 2008 to $357,000 in 201233.

Over the period, the number of funds reporting borrowings in both accumulation and pension phase increased. However the annual growth of SMSFs with borrowings in the accumulation phase was stronger than for those in the pension phase. This resulted in the proportion of SMSFs with borrowings in the accumulation phase increasing from 81% in 2008 to 90% in 2012.

In 2012, SMSFs with borrowings invested a larger proportion of their assets in non-residential and residential real property and in assets held under limited recourse borrowing arrangements, with smaller proportions in cash and term deposits and listed shares.

Compared to the total SMSFs, those with borrowings were more likely to hold non-residential and residential real property, in assets held under limited recourse borrowing arrangements and other assets. Conversely, they were less likely to hold listed trusts and listed shares.

The majority of SMSFs had other liabilities, although the proportion has fallen from 71% in 2008 to an average of 62% over 2009 to 2012. Similarly, the average amount for other liabilities also fell from $16,500 in 2008 to $11,900 in 2012.

    Last modified: 16 Dec 2013QC 37999