“We actually think it’s unlikely that the market has hit saturation point,” said managing director of The SMSF Academy, Aaron Dunn. “The question that needs to be asked is whether the stats are reflecting a current lack of direction on the part of Government and an accompanying loss of consumer confidence in retirement savings policy.”

Mr Dunn said the 2012 Intimate with SMSFs report (the report) from SPAA/Russell research sheds more light on SMSF numbers.

“The report does confirm that new establishments for the December quarter were the lowest since June 2008, when the ATO starting publishing these statistics,” he said, “but on an annualised basis, the 2011 calendar year saw 33,114 new funds established. That’s more than 5% more than the previous year.”

On a net basis, the numbers look even better. “Only 2,769 funds wound up during 2011, so net percentage growth was 67 per cent.”

Mr Dunn also said the growth in younger entrants to the SMSF market presents a great opportunity to advisers.

“Data from the report shows that more than a third – 35.1 per cent – of new members were under the age of 45,” he said.   “They represent a great opportunity to advisers who are prepared to deliver education and advice in an engaged way that resonates with this web-savvy group.”

Mr Dunn said scaled advice is likely to be appropriate for this sector of the market. “In my view, the scaled opportunity presents an exciting time ahead for SMSF advisers,” he said.

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“The ATO is now crystal clear on a lot of contentious issues around limited recourse borrowing, which were frustrating both trustees and professionals,” said The SMSF Academy’s Managing Director, Aaron Dunn. “The draft ruling gives them some much-needed guidance when making decisions around borrowing to invest in property.”

The ATO has defined what constitutes an acquirable asset, a single acquirable asset and a replacement asset and has made the distinction between repairs and improvements.

“The SMSF industry has been arguing long and loud since changes were introduced from 7 July 2010, that the strict interpretive view taken by the ATO in defining the acquired asset by its legal boundaries was too narrow and that it needed to consider the economic substance of the asset,” Mr Dunn said.  “The ATO has not adopted these industry views, however, the draft ruling considers both the legal form and the substance of the asset acquired.  This has many positive implications, in particular it allows trustees to use cash in the fund to improve an acquired asset.”

Mr Dunn said this means that SMSFs with cash reserves are likely to find older properties in need of renovation more attractive propositions, while SMSFs that need to borrow to invest in property are likely to find newer properties, including those available off the plan, more attractive.

However, Mr Dunn said that the draft ruling represents only the Commissioner’s preliminary views on limited recourse borrowing arrangements and the public can still make comments until 28 October 2011.

“While the draft ruling provides direction to the industry so that it can begin to move forward with some degree of confidence, it is important to remember that it is still only a draft ruling,” he said.

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