Superannuation contributions limitations give way to gearing
Limitations around superannuation contributions have given way to gearing in SMSFs, according to the Commonwealth Bank.
Gearing now plays a greater role in the wealth creation process for trustees, according to Moghseen Jadwat, the Commonwealth Bank's head of business development for structured investments.
Jadwat said the rapidly increasing growth of the SMSF market was driving demand for protected lending.
"Employing a conservative gearing strategy under a protected loan can result in an SMSF gaining double the exposure of their super contribution," Jadwat said.
"Generally, an SMSF will get a net tax benefit from a protected loan…this is in addition to the enhanced exposure and potential returns," he added.
The bank said the growth of SMSFs could continue to the point where SMSFs may represent a bigger sector than industry super funds or retail super.
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