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CAANZ reiterates calls for review of borrowing

CAANZ reiterates calls for review of borrowing

Katarina Taurian
28 August 2014 — 1 minute read

Chartered Accountants Australia and New Zealand (CAANZ) has encouraged the Financial System Inquiry (FSI) to recommend a “comprehensive” review of borrowing within superannuation.

In its response to the FSI’s Interim Report, CAANZ stressed it has long supported a review of direct borrowing by superannuation funds, as per the Cooper Review’s recommendations.

While borrowing can be a useful tool for increasing retirement savings, it can also “compound and magnify” losses where investments go wrong, the response stated.

“Not withstanding that a number of funds have already engaged in these arrangements, it is not too late to reconsider policy in this area,” CAANZ said.

“We reject the argument that a review is not needed on the basis that borrowing is not a significant problem with the super industry, particularly with SMSFs, due to its relatively low levels of take-up.

“In fact, we consider this highlights the timeliness of a review to determine whether borrowing is appropriate or not before it becomes widespread, potentially impacting on funding, housing and security of retirement savings.”

CAANZ said should a decision be taken to ban borrowing, it would need to be on a prospective basis, with existing arrangements being grandfathered.

If the FSI determines that borrowing can continue in super, CAANZ recommends a review of the regulatory and legislative framework that supports it.

“Currently, the legislation is difficult to navigate, with breaches of super law occurring too frequently,” CAANZ said.

CAANZ reiterates calls for review of borrowing
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