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Gadens slams Murray’s call to ban SMSF borrowing
International law firm Gadens has slammed the FSI’s recommendation to ban direct borrowing by SMSFs, saying it is likely to be a disincentive to the establishment of SMSFs.
Gadens partners Amber Warren and Jon Denovan suggested the report’s calls for increased competition in the superannuation sector is contradicted by its calls for borrowing in superannuation to be banned.
“Banning the ability for SMSFs to use leverage to build wealth inside the fund is likely to be a disincentive to the establishment of SMSFs, resulting in reduced competition and associated downward pressure on fees,” Ms Warren and Mr Denovan stated in an article.
The article also said that the misuse of limited recourse borrowing arrangements (LRBAs) could be addressed through imposing certain restrictions which do not amount to an outright ban.
“The risk of mis-selling could be addressed by imposing some reasonable controls on SMSF borrowing, such as requiring an SMSF’s equity in the real estate to comprise no more than 50 per cent of the fund’s assets and total borrowings (being limited to, say, 80 per cent),” the article stated.
“Another option to address concerns in relation to the misuse of LRBAs would be to remove the ability of SMSFs to borrow funds from related parties, which are often provided to fund up to 100 per cent of the purchase price of the property. Such loans account for the majority of the small percentage of LBRA-related contraventions identified by the ATO.”
Ms Warren and Mr Denovan said it would be appropriate for the government to defer its consideration of any changes to superannuation until 2020, when the Productivity Commission will conduct a “fuller review” into the superannuation sector.
the sensible answer to borrowing in super is to make it 50% LVRs not ban it outright. This is broadly the UK system which has worked well0- Not a mention in the Murray report about other lending outside of super- mortgage broking a vehicle finance.
Don't won't to go there eh?0 - The borrowing laws should stay the way the are. People borrowing to purchase a property in super will own a property in the fund before they own their own homes.
Further the individual has freedom of choice of direct investment and is not limited just the share market, cash or a managed fund.
There will be property syndicates doing selling an interest in property rather than the members seeking out a property.
Mr Murray being a Comm Bank executive has just improved the financial planning fees to the big 4 banks.0 - Notice all the protests coming from disguised self interests threats a.k.a. loss of fees, advice, revenue streams. Not the protection of assets, member's rights, safety, benefits or trustee's liabilities, all the things which should be prime considerations. What a mess we get out Simple Super into!!!!0
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