PIPA calls for alternatives to LRBA ban
Property Investment Professionals of Australia (PIPA) is urging the government to consider alternatives to an outright ban of borrowing in SMSFs including improved education and a ban on personal guarantees.
Speaking to SMSF Adviser, PIPA chair Ben Kingsley said he considers the risk of limited recourse borrowing arrangements (LRBAs) creating any mass problems for SMSFs to be remote and that issues around borrowing should be addressed in other ways first.
“Let’s start with educating SMSF trustees first by making sure they understand the risks associated with incorporating borrowing into their investment strategies,” said Mr Kingsley.
“Secondly let’s put some better regulation around the investments they are trying to borrow money on – for example if they are looking to borrow money to invest in direct property then let’s regulate advice on property investment.”
Mr Kingsley said the government should also be looking at some of the other mechanisms on the lending side that can be changed.
“I would be encouraging lenders to remove the personal guarantee obligation which will then remove risks for the super fund as it removes any further obligation of the trustees or the individuals who are providing those guarantees,” he said.
“Obviously the banks may need to address their pricing in terms of the interest they charge clients by removing that risk, but that would be another solution outside of just putting a ban on lending inside a super fund.”
Restricting SMSF trustees from using LRBAs, Mr Kingsley said, is giving consumers less opportunity to be able to invest for a self-funded retirement.
“The goal of super isn’t necessarily just a savings vehicle, it’s an investment vehicle to allow people to provide for a self-funded retirement to take the pressure off government to provide for people in their retirement,” he said.
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 also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.