SPAA chief executive Andrea Slattery said the association is confident that adherence to the guidelines by the banking and financial advice industry will ensure that LRBAs are being used appropriately by SMSF trustees.
“With NAB signing on and other major lenders in the pipeline, the government and regulators can have a high degree of confidence that LRBAs are being used appropriately,” said Ms Slattery.
She said two sets of guidelines have been developed for the industry: the LRBA lenders’ best practice guidelines and LRBA advice best practice guidelines.
The lenders' guidelines emphasise the importance of lenders providing SMSF trustees with factual information from a qualified specialist on what LRBA involves and the possible scenarios associated with it.
“Lenders are required to make a recommendation to the SMSF trustee that they seek appropriate specialist SMSF, financial and legal advice in regards to their SMSF entering into an LRBA,” the guidelines state.
The advice guidelines aim to provide SMSF trustees access to appropriate advice regarding the suitability of an LRBA from a competent and appropriately licensed adviser.
“Obtaining such advice should help to ensure LRBAs are only being invested in by SMSF trustees after understanding the nature of the investment strategy and the risks associated with it,” the guidelines state.