The data on LRBAs indicates the Financial System Inquiry’s recommendation to ban borrowing in super is attempting to remedy a problem that doesn’t exist, suggests the principal of a boutique advice firm.
While many of the Financial System Inquiry’s recommendations have been well-received by the financial services community, Paramount Wealth Management principal Wayne Leggett said in an upcoming issue of ifa, SMSF Adviser's sister publication, there are some “glaring exceptions.”
Mr Leggett pointed to the ATO statistics of borrowings held in SMSFs, saying the levels of gearing in super are “hardly cause for panic.”
“As at June 30, the total of assets in super, according to the ATO, was around $1.85 trillion. According to statistics released by APRA earlier this year, SMSFs control just under one-third of the total assets in super. Statistics released by the ATO as at June 30, 2012 suggest that borrowing represented only 1.4 per cent of the total assets in SMSFs,” Mr Leggett said.
“Based on this, unless the size of the SMSF sector as a proportion of the total funds in super has increased dramatically and is matched by a corresponding increase in the proportion or borrowings within SMSFs, even an optimistic estimate of the proportion of borrowed assets in the greater superannuation sector would be less than one per cent.”
The FSI’s suggestion to LRBAs has not enjoyed the support of the SMSF sector, with some suggesting a removal of borrowing in super would be detrimental to small business owners.
"Countless small business owners utilise the LRBA rules to own their business premises. With a blanket ban on borrowing within super, there may be a negative impact on small business around the country," said David Lane, director of wealth management at mid-tier firm Pitcher Partners.
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