The Reserve Bank of Australia has stated that SMSFs are one of the key developments in superannuation that “bear close monitoring”.
In its submission to the Financial System Inquiry (FSI), the RBA stated that as SMSFs increase in importance within the superannuation sector, their ability to leverage raises concerns about SMSF members being exposed to greater financial risks “than they understand they are taking”.
“To the extent that banks are lending to SMSFs, they appear to be managing the potential risks of limited recourse borrowing arrangements by their frequent requirements for personal guarantees from SMSF members, minimum fund net asset requirements, and lower maximum loan-to-valuation ratios than often imposed on their other property lending,” the RBA also stated.
Since 2007, SMSFs have been permitted to borrow and purchase an asset under limited recourse conditions, increasing the accessibility and attractiveness of property investment via an SMSF, the RBA said.
“At least some of the increase in property investment by SMSFs is a new source of demand that could potentially exacerbate property price cycles,” the RBA added.
Late last year, the RBA suggested that action might be needed to take the heat out of the property sector, with concerns that outflows from SMSFs into property are creating a property bubble.
“One risk of the increase in property investment by SMSFs is that at least some of it is a new source of demand that could potentially exacerbate property price cycles,” the RBA stated in its Financial Stability Review for September 2013.
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
23 Jun 2017Trustees reminded of ‘positive’ CGT news as EOFY loomsBy Katarina Taurian
23 Jun 2017SMSF practitioners told to reassure clients in 30 June lead upBy Miranda Brownlee
23 Jun 2017SMSFs warned on 30 June cut off for electronic transfersBy Staff Reporter
22 Jun 2017Westpac veteran and SMSF exec set to departBy Staff Reporter
22 Jun 2017ATO sets compliance targets for auditors in 2017-18By Miranda Brownlee
22 Jun 2017CGT relief still plaguing trustees, says former ATO execBy Miranda Brownlee
- view all
Trustees reminded of ‘positive’ CGT news as EOFY looms
A capital gains tax (CGT) issue that was causing confusion in the industry has been cleared up by the ATO, and professionals are being remin...read more
SMSF practitioners told to reassure clients in 30 June lead up
With the focus predominantly on super members with above $1.6 million, it may be worth practitioners informing clients unaffected by the ref...read more
SMSFs warned on 30 June cut off for electronic transfers
With a significant portion of Australians missing the 30 June cut off last year when making non-concessional contributions, Colonial First S...read more
- view all