“Cashed-up SMSFs are going to be very well positioned to invest in property but we’ll obviously find that any increases they see from rents coming through could be eroded by inflation in terms of repairs and maintenance and other expenses,” said Ms Banton.

“For funds that have invested in property through an LRBA, they may be locked in a lease agreement whereby the rents are fixed but the cost of maintaining that property is going to cost more.”

While SMSFs with fixed rate loans haven’t really been impacted by increasing interest rates yet, those on variable rates are already feeling effects of the movements in the cash rate by the Reserve Bank.

“[The cash rate target] is currently 2.85 per cent but its tipped to rise as high as 3.85 per cent next year depending on who you listen to. That’s definitely going to have a flow-on effect to those SMSFs,” Ms Banton warned.

“We may actually see some mortgage stress in those funds, particularly where they’re relying on contributions to pay a mortgage on a loan on a property which was purchased at the top of the market.”

Ms Banton noted that current interest rate for related party loans for real property for the 2022–23 financial year is set at 5.35 per cent. However this is expected to see a significant increase next year when the interest rate resets for the 2023–24 income year in June.

Speaking in the same podcast, SuperConcepts senior SMSF technical specialist Anthony Cullen explained that with all the COVID relief measures ceasing 30 June this year, some SMSF clients are now also having to make catch up payments on amounts that were deferred under the relief measures that were in place during COVID-19.

One of the relief measures introduced for the 2019–20, 2020–21 and 2021–22 income years was repayment relief for limited recourse borrowing arrangement relief.

This relief allowed related party lender to be able to offer an SMSF loan repayment relief due to the financial impacts of COVID without contravening the super laws.

However, the ATO made it clear that interest would continue to accrue on the loan and that any deferred principal and interest repayments would need to be repaid in accordance with the varied terms of the loan.

“All those measures that were implemented during COVID in terms of rent deferrals and waivers of loan repayments, that all ceased on 30 June 2022.”

“So on top of these [existing] cash flow issues in terms of receiving rent and making loan repayments, some clients will also need to start catching up on those deferred repayments on top of that.”

Where an SMSF is experiencing cash flow issues or mortgage stress with their property loans, Mr Cullen advised SMSF professionals and their clients to address the issue straight away.

“That’s not something you want to delay [till the audit] for the 2023 financial year. That’s something they need to be thinking about now.”