Mr Townsend said the report’s recommendation that SMSF borrowing be banned because it does not comply with the ‘savings vehicle’ philosophy is “biased against SMSFs unless public offer funds are similarly turned into solely savings vehicles”.

If this notion of super as a savings vehicle was to be accepted consistently, Mr Townsend said funds would be banned from investing in anything other than the safest and least volatile of investments and certainly not the share market.

“Even the most blue-chip sector of the market cannot guarantee a complete lack of volatility and therefore should be more appropriately put in the ‘wealth management’ box not the ‘savings’ box,” he said.

“This new characterisation of superannuation would permit only the least volatile of investments – term deposits backed by the strength of Australian banks with their new capital adequacy requirements as recommended by the report.”

Mr Townsend also questioned the need for the inquiry to address borrowing in SMSFs at all.

“The truth of the matter is that with assets subject to borrowing accounting for only about 1.7 per cent of all assets held by SMSFs, the borrowing ban is a solution to a non-problem,” said Mr Townsend.

“It is designed to make the public offer funds feel better after the report severely criticised their fees and has nothing to do with the proper administration of self-managed superannuation.”

Chan & Naylor managing director Ken Raiss also believes the recommendation “reflects the ongoing hypocrisy of the broader financial services sector”.

“The notion that an SMSF should not be able to borrow for investments like property but that APRA-regulated funds can via geared managed funds, as proposed in the report, is a showcase in duplicity,” said Mr Raiss.

“Taking away the opportunity to borrow within a SMSF structure is fundamentally at odds with the original intent of the FSI, which was to define a future financial system that will best meet Australia's evolving needs and support Australia's economic growth.”