Graeme Colley
The SMSF Association is confident a compromise position can be found on Limited Recourse Borrowing Arrangements (LRBAs) in the wake of the Financial System Inquiry (FSI) recommendation to ban borrowing inside superannuation.
Graeme Colley, the Association’s Director, Technical and Professional Standards, told the Sydney State Technical Conference today there were “positive signals” emanating from Canberra that suggested a compromise could be found on this issue.
In his Regulations and Legislative Update address to Association members, he said the FSI final report noted it had “several concerns” about borrowing in superannuation, including magnified risk, a concentration of assets, not being truly limited recourse, and the capacity to circumvent contribution caps.
Colley said the Association had never agreed that the risks posed by LRBAs justified a total ban.
“As the evidence highlighted in the Intimate with Self-Managed Superannuation report released yesterday showed, LRBAs, as a percentage of total SMSF assets, are still a small percentage of the total pool. They are increasing, but not to a position where they are a threat to the system.
“In light of this evidence, the Association’s view is that by implementing some measures to mitigate risk, then LRBAs have a viable role to play in SMSFs.
“What we have proposed is the licensing of LRBA advice; greater resourcing of ASIC to crack down on the spruikers; to limit use of personal guarantees and tighten related party earnings; and establishing LRBA industry best practice guidelines.”
LRBAs aside, Colley said the SMSF sector was entitled to take a vote of confidence from the final FSI report that made no other recommendations to curtail their activity.
“The lack of comment about our sector, especially in light of some of the issues raised in its interim report, can only suggest that David Murray and his fellow members of the inquiry, were relaxed about the state of play with SMSFs.
“Perhaps we shouldn’t be surprised. In 2010, the Cooper Review came to a similar positive view about the SMSF sector.”
