The SMSF Owners' Alliance (SMSFOA) is supporting concerns raised by the Financial Systems Inquiry (FSI) about geared investments in SMSFs, noting that “risk is increasing” for trustees.
SMSFOA has said that while geared investments are only held by a minority of SMSFs, it welcomes further examination of the issue.
“While only a small minority of SMSFs borrow, the number that do so is growing and risk is increasing,” SMSFOA said in a release.
“It is of particular concern that some SMSFs may be established, on dubious advice, to invest in one, geared asset - often residential property, although the proportion of SMSF assets held in residential property remains low at around 3.5 per cent.
“We will comment further on whether a prospective ban on borrowing is necessary in our follow-up submission to the FSI.”
SMSFOA said that other solutions to borrowing concerns in SMSFS include imposing stricter conditions on lenders and improved regulation of property promoters and advisers.
However, SMSFOA has disagreed with suggestions that a majority of superannuation tax concessions go to high-income earners, who would save enough to fund their retirement without additional tax relief.
“To state that higher-income earners get a greater dollar benefit from superannuation tax concessions is simplistic and ignores the fact that contributions to SMSFs are capped and the tax concession is therefore limited,” SMSFOA said.
“Full income tax is paid on contributions to super above the voluntary contribution limits.
“It also fails to take into account that Australians on higher incomes pay substantially more tax even after superannuation tax concessions.”
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