Adviser tips SMSF borrowing to stay

The government will not risk “political capital” by banning LRBAs outright, according to the managing director of a boutique advice firm.

Speaking to SMSF Adviser, John Hopkins Group managing director Michael Williams said despite the recommendation to ban limited recourse borrowing arrangements (LRBAs) in SMSFs in the final report of the Financial System Inquiry he is “confident they won’t ever be wound back”.

“I don’t think the government will spend the political capital to enable that to occur,” said Mr Williams.

The recommendation, he said, is only one of the 50 points put forward by David Murray and that out of most reviews only five percent of all recommendations are generally taken up.

Mr Williams said he would, however, like to see some further tightening in the LRBA space.

“I think there is still room for tightening in respect to loan valuation ratios or specific training requirements for advisers who give advice about LRBAs,” he said.

He also said ASIC should continue to look at organisations providing advice about LRBAs without the appropriate licensing in place.

“So within that space we’ve still got some room to play but I don’t think the talk about it being banned altogether will ever eventuate,” he said.

 

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