Speaking to SMSF Adviser, Omniwealth’s managing director Matthew Kidd said although the ATO is reticent to make sweeping changes to SMSFs, the FSI Report has brought lending in SMSFs firmly “under the microscope”.
Mr Kidd said there is also pressure from industry bodies as well as the retail and industry super funds to introduce greater legislation and regulation to the SMSF sector.
“Every year there’s a cry from the industry funds and retail funds that there needs to be more regulation,” said Mr Kidd.
“I look at that a bit cynically, I think he who yells loudest probably has the most to gain.”
Mr Kidd said while the government and ATO are likely to look at limiting the amount that can be borrowed with an SMSF, he says an outright abolishment of gearing in SMSFs would be a “foolhardy reaction” to any of the current issues associated with it.
“I think it would be a knee-jerk reaction to one man’s report and requests by the industry super funds and the larger retail super funds that are losing inflows to self-managed super,” he said.
“I believe there may be a need for more legislation, but you don’t swing the pendulum completely to the other side; there needs to be a happy balance.”
Mr Kidd said it is perfectly natural for the retail super and industry super companies to want to restrict inflows to SMSFs as they are essentially a threat to the inflows to their own funds.
He said the SMSF industry should hold off panicking about changes to borrowing in SMSFs just yet given that the changes may well not be implemented by the government.
“If we go back to the Henry Report in relation to the changes to the tax system, I think there were very few recommendations taken on board,” he said.
“Having said that there is definitely going to be some changes to the industry in the next year, if not the next couple of years.”
It seems to me mr Kidd is ‘yelling fairly loudly’ I agree with the Murray report:-
In a scenario where there has been a significant reduction in the valuation of an asset that was purchased using a loan, trustees are likely to sell other assets of the fund to repay a lender, particularly if a personal guarantee is involved. As a result, LRBAs are generally unlikely to be effective in limiting losses on one asset from flowing through to other assets, either inside or outside the fund.
Perhaps if industry funds were able to invest member’s money as holistically as SMSF trustee’s, they wouldn’t be so concerned about the SMSF sector and trying to change our rules.
I agree with Mr Kidd.
He is yelling amongst the loudest who have most to gain.
Great Article, I agree with your logic and it is about time a balanced perspective was put forward rather than reading articles from those that only support getting rid of LRBA – most likely for their own interest and benefit and not for the Beneficiaries of the superfund.