MFAA hits back at ICAA on SMSF borrowing

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.”