Broker association applauds government for rejecting SMSF borrowing ban

by Julia Corderoy23 Oct 2015
The FBAA has applauded the Turnbull Government’s decision to reject a a recommendation from the Murray Financial Systems Inquiry on SMSF lending.

In its response to the final FSI report, the Treasury stated it did not agree with the FSI’s recommendation to prohibit limited recourse borrowing arrangements (LRBA) by SMSFs. This was the only one of 44 recommendations not to gain acceptance.
 
Peter White, the chief executive of the FBAA has welcomed the government’s decision to reject this recommendation, saying there is little evidence of abuse of LBRAs. 
 
 “In reality, the level of activity with borrowing has been small in the overall context of total assets inside the SMSF and broader superannuation sectors,” White said.

According to the Self-Managed Superannuation Funds: A Statistical Overview 2012-13 report, released by the ATO in December, assets held under LRBAs increased to $8.3 billion, or 1.68% of total SMSF assets in 2013, up from $497 million or 0.15% of total SMSF assets in 2009.

However, despite the value of LRBA investments increasing, the report also revealed that only 2.7% of SMSFs reported assets held under this type of agreement.

But as the broking industry continues to see a rise in SMSF lending for property, White says brokers need to be wary of the dangers of unscrupulous real estate spruikers posing as financial advisers.
 
“As brokers we see this as a worsening problem as more and more real estate groups are pushing people into SMSF’s to gear up and purchase property,” he said.
 
“I have said it before but it bears repeating. The property spruikers create the problem in the SMSF lending space and that is where ASIC needs to focus. The FBAA would like to see a change so that SMSF holders cannot allocate a property to their fund which is less than two years old.”
 
“That would ensure the spruiker and the ‘middle man’ are not financially involved.”
 

COMMENTS

  • by Paul 23/10/2015 9:55:44 AM

    If an SMSF can borrow to purchase property then an SMSF should be able to borrow to purchase equities. The current rulings in relation to gearing for equities are misguided. The current rules encourage an over exposure by trustees to residential property.