Banning LRBAs a ‘foolhardy reaction’
Banning borrowing in superannuation would be a knee-jerk reaction to “one man’s report,” according to the managing director of a Sydney-based advisory firm.
Speaking to SMSF Adviser, Omniwealth’s managing director Matthew Kidd said although the ATO is reticent to make sweeping changes to SMSFs, the FSI Report has brought lending in SMSFs firmly “under the microscope”.
Mr Kidd said there is also pressure from industry bodies as well as the retail and industry super funds to introduce greater legislation and regulation to the SMSF sector.
“Every year there’s a cry from the industry funds and retail funds that there needs to be more regulation,” said Mr Kidd.
“I look at that a bit cynically, I think he who yells loudest probably has the most to gain.”
Mr Kidd said while the government and ATO are likely to look at limiting the amount that can be borrowed with an SMSF, he says an outright abolishment of gearing in SMSFs would be a “foolhardy reaction” to any of the current issues associated with it.
“I think it would be a knee-jerk reaction to one man’s report and requests by the industry super funds and the larger retail super funds that are losing inflows to self-managed super,” he said.
“I believe there may be a need for more legislation, but you don’t swing the pendulum completely to the other side; there needs to be a happy balance.”
Mr Kidd said it is perfectly natural for the retail super and industry super companies to want to restrict inflows to SMSFs as they are essentially a threat to the inflows to their own funds.
He said the SMSF industry should hold off panicking about changes to borrowing in SMSFs just yet given that the changes may well not be implemented by the government.
“If we go back to the Henry Report in relation to the changes to the tax system, I think there were very few recommendations taken on board,” he said.
“Having said that there is definitely going to be some changes to the industry in the next year, if not the next couple of years.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.