The ICCA would like to see a review of the appropriateness of borrowing in superannuation funds, given the concerns from “significant” regulators and bodies, such as the Reserve Bank of Australia and ASIC.
“We need to make a decision – is it in or is it out? If it’s in, then we need to make sure we’ve got the right regulatory framework around it,” ICAA head of superannuation Liz Westover told SMSF Adviser.
“I think we just need to do a really strong analysis of it and we need to listen to what people are saying and work out whether or not in the long term… borrowing is the type of thing we want to see in superannuation,” she added.
Ms Westover said the ICAA views borrowing as “one of the last things” trustees should be considering when establishing an SMSF.
“You need to think about where your money is currently held, whether you’re looking at pulling that money out of an industry fund or a retail fund where it might have access to insurance [etc]. Those are the types of things you should be considering first, not your ability to borrow,” Ms Westover said.
The ICAA previously stated that addressing mounting concerns related to borrowing arrangements is “crucial” to the strength of the SMSF sector.
“In 2010, the Cooper Review found that borrowing was not consistent with Australia’s retirement income policy and a review was needed within two years,” Ms Westover said.
“This review is now overdue. The industry needs it to happen in order to identify what changes may need to be made to the current policy settings around borrowing within SMSFs.”
I partially agree with Mr Westover that this area needs to be looked at. However a good Financial Planner will take into account those things and many more things before even discussing the use of debt in an SMSF. It is not the arrangements that are the issue it is the unqualified and unscrupulous advice given by people who now nothing about SMSF but use this vehicle to get kick backs and commissions and care little for the long term outcome for the client. We all know there are advisers, property spruikers and accountants out there earning these types of fees and nothing is being done about it. An SMSF is still supposed be your vehicle to your financial security in your retirement BUT it seems that most have forgotten this!
I dont quite get this. There are a whole SIS act full of regulations. Are we asking for more regulations – please dont tamper any more with the system.
Superannuation should be a stable system and the goal posts should not be moved every year.
While I personally don’t see much point in placing interest deductions in a low or no tax entity, who are these nannies who think they can tell people how to look after their own money? It’s not as though the so called professionals have done a great job through the GFC.
The regulators would better off showing they can recover Trio assets, but that is hard work.
Incidentally if anyone can really and truly understand what is a “related party of a fund” I would appreciate a primer. The Act is gobbledygook.
There is no issues with borrowing in Superanuation it’s a media beat up and Just another group trying to get their slice in the pool of superanuation.
Once again we seek more Govt regulation. My professional body has obviously not asked the smaller practitioners whether their clients are happy with borrowing or not. If not, they do not do it. Benevolence from above telling people how they should run their own lives once again. We should be looking at how we can safely remove regulation from a sector that looks after itself and its own money. If they make a mistake, they hurt only themselves, not millions of others.