This article is from the Australian Property Journal archive
Recent changes to taxation rules have led to more self managed super funds. According to the National Australia Bank, SMSFs are emerging as the key vehicle to drive growth in the commercial property market.
An expert panel from NAB, Deloitte Touche Tohmatsu and Charter Keck Cramer told audiences at the NAB business property forum that recent changes to superannuation legislation offering tax concessions have made business property more attractive.
The panel said SMSFs are emerging as a key vehicle enabling small and medium sized investors to acquire business property.
NAB’s executive general manger for business and private banking George Frazis said the need for small and medium sized businesses to diversify was a driver for business property growth.
He added that structural change in the business property market has broadened the options for investors, with the creation of more property trusts and syndicated property groups, as well as the recent onset of self managed superannuation funds.
“These structural changes have caused a reduction in volatility and reduced the risk of investing in business property so the market has become more sustainable.” he added.
Meanwhile, Deloitte Touche Tohmatsu’s property tax partner Joe Galea tax changes in the May 2006 Federal Budget would have an impact on the property market over the next few years.
“The capacity to put money into superannuation that converts into either a tax free pension or lump sum benefits from age 60 is going to result in more money going into superannuation via self managed superannuation funds.
“Those self managed superannuation funds will find their way into syndicated or secrutised property or direct investments in property,” he added.
Charter Keck Cramer’s managing director and property valuer Scott Keck said the ever-increasing amount of superannuation, combined with the population growth and demographic change in Australia, is a catalyst to create more accommodation in all categories of business property.
“The union of that need for real estate with the availability of superannuation funds will continue to generate a lot of investment in this area – from individuals through to syndicates and institutions,” he added.
Keck said it also was important to understand that property risk cycle as more people were investing in property directly as part of their superannuation strategy.
“The risk progressively increased for each category – with residential property offering the lowest risk, followed by retail, then light industrial or showroom, office and finally heavy industrial property.” he added.
Frazis said small to medium sized businesses should ensure their cash flow was secure before considering diversifying into business property.
“When businesses get into trouble, its when they haven’t managed their cash flow correctly or they haven’t managed growth. When these two things are under control, they you’ve got an opportunity then to look at diversifying your investments.
“Don’t just limit yourself to buying the property that your business is involved in. If it’s not strategically important to your business, then consider the return on diversification that other commercial properties provide. And seek advice from your financial adviser,” he concluded.
By Kathryn O’Meara
