Login
Login
MFAA hits back at ICAA on SMSF borrowing
The Mortgage & Finance Association of Australia (MFAA) has rejected the Institute of Chartered Accountants Australia's (ICAA's) continued calls for a review of SMSF borrowing, saying the SMSF lending space is currently operating well.
Despite the government’s rule-out of a review of limited recourse borrowing arrangements (LRBAs), ICAA head of superannuation Liz Westover told SMSF Adviser a review of SMSF borrowing remains necessary to “pre-empt any problems down the track”.
MFAA lead facilitator and subject matter expert Peter Dunworth has since told SMSF Adviser that lending in the SMSF space is already closely monitored and adequately regulated.
“The horror stories about trustees being pushed into SMSF borrowing were manufactured in the past… brokers aren’t doing this,” he said.
“SMSF lending requires double the amount of work for a traditional broker to do and it delivers a substandard commission,” he added.
Mr Dunworth also said the focus should be on whether trustees who aren’t engaging professionals in a borrowing transaction are getting enough education to avoid potential risks.
“At the end of the day, you can’t protect someone from their own ignorance when it comes to this, no matter what advice gets delivered across the way, clients have the ability to effectively sabotage that advice,” he said.
“The structure itself won’t protect someone from a lack of diversification or potential cash flow issues,” he added.
MFAA chief executive Phil Naylor also previously told SMSF Adviser’s sister publication The Adviser that SMSF lending does not require any further regulation.
“I've not seen any problems. I think what people are apparently saying is that there might be some problems [further down the track] but I’ve not seen any evidence to date,” he said.
“If ASIC has seen problems they would have jumped on them… I think they have made it clear that they are watching it [SMSF lending] very closely and they will jump on anyone who operates inappropriately in that area very quickly.”
Peter, if you go into any bank how many fp's do they have to throw at you for quick product flog? When they need a signoff by a real pf they outsource (the risk of course) outside the bank!
I have been put in the situation you describe, I refused. Btw I was asked for it in 24hrs!!
The current system is a crock.0- If the SMSF lending regime is operating so well, why are lenders persisting in requiring SMSF trustees to obtain a financial planner sign off on these loans. Often the financial planner has not been involved in the transaction until a day or two before settlement when the trustee comes knocking on the local financial planner's door asking them to sign the certificate. Any professional planner will need to undertake data collection, carry out cash flow modelling and prepare a SoA to support their sign-off. And how do they fulfil their best interest duty when their research tells them that the SMSF is not the most appropriate structure? If the system is working so well, perhaps the lenders can rely on their own due diligence and credit assessment rather than placing trustees and planners under duress in having to sign these certificate, often at very short notice.0
- The area is complex and expensive. I agree with D ubious the costs are totally excesive. With all the loans I have seen, the banks even require the Trustees to guarantee the loan. I have always had issue with the fact that a non recourse loan has to have individual gaurantees.0
- Why would the MFAA say this is working well? The fee structure for setting up a loan within a SMSF is a joke. The higher loan rates are a joke. The financial planner fees the banks insist on are a joke. The only thing that isn't a joke are the people who are as gullible as the ones involved in the recent Charterhill fiasco. I personally have no problem with SMSF borrowing, but I with the suckers born every minute would ease up a little.0
- Unfortunately, ASIC doesnt act until it all hits the fan. The real issue seems to be the property spruikers flogging overpriced, overvalued properties to gullible people who dont do their own homework. It is always hard to protect people from themselves.0
- Allowing borrowing in SMSF's WILL have huge problems in the future.
My observation is that people who do not have the ability to be trustees of a SMSF are pushed by outside parties to invest in areas which MAY cause grief in the future.
For Mr Dunworth to say "at the end of the day, you can't protect someone from their own ignorance....etc" is poor form in my opinion.
To be a trustee of a SMSF you SHOULD have to ability to run and have the knowledge and understanding of ALL the responsibilities of a trustee of a SMSF.
Ignorance is not a reason it is an excuse.
As accountants, we are often supprised by clients coming in and telling us they have cashed in their super and now have a SMSF and have purchased residential property. They have attended some spruk seminar and have been taken up in the moment.0
Subscribe to the
BULLETIN
Get the latest news and opinions delivered to your inbox each morning
Subscribe
