LRBAs a looming ‘disaster’, says Hewison

The latest ATO figures reveal that assets held by SMSFs using LRBAs have increased to $8.7 billion as at June 2014.

Hewison Private Wealth managing director John Hewison said that while LRBAs can be an appropriate investment strategy for some high-net-worth individuals, investors are at risk from property spruikers and mortgage brokers tapping into the “lucrative revenue stream”.

Mr Hewison said some brokers and spruikers are showing “complete disregard” for the individual circumstances of each investor.

“Younger investors with minimal account balances are being encouraged to borrow large amounts of money in order to buy properties in their super funds,” he said.

“Further, middle-aged individuals, who should be risk averse and preparing for retirement income streams, are also being led down the path of gearing property.”

LRBAs are suitable for individuals who incorporate the structure into their strategy without compromising the sole purpose test, maintain appropriate levels of liquidity and flexibility and incorporate a legitimate debt reduction program, stressed Mr Hewison.

“However, as history has repeatedly shown, legitimate investments are compromised by a select number of operators who abuse the system and cause havoc for investors,” he said.