SMSFOA recommends review into property, gearing
The SMSF Owners' Alliance (SMSFOA) has recommended a formal review of the decision to allow SMSFs to gear into property in its submission to the Financial System Inquiry.
In its submission, the SMSFOA said allowing SMSFs to gear up property has become a controversial issue, particularly in relation to its possible impact on the residential property market.
“Better structuring and regulation of advisers and product sellers should assist in reducing the number of SMSFs for which their trustees have not fully appreciated the risk of high property gearing,” SMSFOA stated.
“However, Cooper suggested that this issue be reviewed and we would be happy if a formal review of this subject was undertaken.”
SMSFOA also stated the government needs to make it clear to the market that it will “not provide guarantee or other financial support to APRA-regulated funds or SMSFs in the event of any investment losses”.
“There has been some suggestion that the government should have rescued SMSF investors from the failure of particular investments,” SMSFOA said.
“However, we consider that the government already provides a form of guarantee or support in the extreme case of a catastrophic failure of someone’s superannuation investment in the form of the age pension. No further guarantee support is needed,” they added.
SMSFOA also recommended that the government recognise that SMSFs require less prudential regulation than APRA-regulated funds, as the Cooper Review stated.
“In contrast to APRA-regulated funds, there is no corresponding issue of trust for SMSFs as the trustees and beneficiaries of these funds are the same people,” the submission stated.