Small lender thinks bigger in SMSF space

Commercial property lender ThinkTank is expanding its self-managed superannuation fund lending business, aiming to fill the gap left by the big banks exiting the market.

ThinkTank has been doing SMSF lending for commercial property acquisition for the past five years.

Now it is moving into residential property SMSF lending, which is a different product because it is a different security.

ThinkTank chief executive Jonathan Street says the company has originated A$170 million of SMSF loans. The loans have low loan-to-valuation ratios and terms are all principal and interest

Street says: "We have zero arrears and zero losses in that portfolio. You can't get a better performing set of loans.

"Based on our experience with this product, we would say that if it is managed well it is a valuable wealth accumulation strategy."

Last week, the Treasurer announced that the government had decided not to make any changes to the borrowing arrangements for SMSFs, after reviewing a report on the issue by the Council of Financial Regulators and the Australian Taxation Office.

Treasurer Josh Frydenberg said the report found only a small proportion of SMSF assets were funded using borrowed funds and did not pose a material systemic risk.

SMSF lending has long been controversial and in 2014 the Financial System Inquiry recommended that it be banned.

The major banks have all quit the SMSF lending market, with NAB dropping out last month.

According to ATO data, limited recourse borrowing arrangements in the SMSF sector were worth $42.8 billion in the December quarter, with little growth recorded over the previous 12 months.

A little over 5 per cent of SMSF assets are funded with borrowings.