Assistant Treasurer Arthur Sinodinos recently announced that the Coalition will not be conducting a review of LRBAs, as initially recommended in the 2010 Cooper Review.
However, a review of borrowing should still be considered to ensure trustees do not become “inadvertently unstuck”, the Institute of Chartered Accountants Australia’s head of superannuation Liz Westover told SMSF Adviser.
“We shouldn’t wait for there to be a problem to worry about it. We’ve got this opportunity here, with enough people having raised borrowing in superannuation as a potential issue, that we should be looking at it now to pre-empt any problems down the track,” Ms Westover said.
“The decision might be made that borrowing is appropriate and if it is then we can make an assessment of the regulatory framework around it to make sure… there’s no unintended consequences of the legislation,” she added.
“The last thing we need is for it to blow up and be an issue and then try and deal with it. Now’s the opportunity to pre-empt anything going wrong, make some decisions about the future of borrowing within super over the long term, and deal with it accordingly.”
Ms Westover said the ICAA will continue to raise the issue of a review into borrowing with Senator Sinodinos and other relevant stakeholders.
Liz is right – we should now be looking at what can be structurally done to strengthen up LRBA’s.
My pet topics is to mandate reasonably conservative LVR’s so property likely to be positively geared so in event of downturn no firesales
Second if supported by a licensed valuation residential property can be bought from a related party. That will reduce a lot of incentive to so called property spruikers and what is the sin if bought at proper market value?
1. The non arm’s length income penal tax rate on private company dividends and trust distributions requires expensive and careful advice in each case. The presumption is against the SMSF.
2. The definition of “related party” is too wide and virtually unintelligible. This is another barrier to investment outside the publicly-listed sphere.
Two or more super funds – without controlling the trust can invest in a geared trust…. so what are we trying to fix…
Well another accounting body with a comment on SMSF’s to I detect advice envy? When are we going to get some common sense on this. All the arguments have been run, stop looking for the monster under the bed. Why is the ICAA not worrying about the standard of accounting advice and education, or lack of proactive tax advice still be given by many accountants and the constant breach of accountants giving advice and denying it. I would like to see an ASIC sting on that and then the media would have something to write about.
Excuse me? It is OK for a superfund to invest in a highly geared listed public company but not in an unlisted geared private vehicle?
How does this fit with competitive neutrality?
The rules against SMSFs investing in related parties and the potential penalty tax on income from private trusts and companies already represent a massive disguised capital subsidy to big business. The ICA should be campaigning against those biases in the system.