There will be no ban on self-managed super fund (SMSF
) borrowing to purchase property, according to the assistant treasurer, but tougher regulation could be likely.
Speaking at the Tax Institute annual superannuation conference in Sydney on Friday, assistant treasurer Josh Frydenberg gave the biggest indication yet that the Abbott government has no plans to ban limited recourse borrowing arrangements (LRBA
s) through SMSF
s to purchase real estate, Fairfax
David Murray’s Financial System Inquiry, released in December 2014, called for LRBA
s to be prohibited, warning that such arrangements increased speculative investment which could pose a risk to the financial system over time.
“I want to emphasise that we have been considering this recommendation very carefully but flag that we want to make sure the approach we take is proportionate to the risks that have been identified,” Frydenberg said.
“To put it in context only 0.07%, perhaps 6,500 properties, were held in an SMSF
through a limited recourse borrowing arrangement in 2013.
“David Murray highlighted the risks associated with increased leverage in the financial system. Increased leverage always represents a risk and we recognise that. The government also recognises that most SMSF
s do the right thing.”
When asked whether there were any plans to tighten the rules around SMSF
borrowing – instead of implementing a complete ban – Fairfax
reports that the assistant treasurer said it was “under consideration”.