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.
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