Big four firm urges government to take decisive stance on LRBAs
After years of constant analysis and tinkering, it is time the government made a firm decision on whether it wants to allow borrowing by super funds or not and implement some more practical legislation if it does, says a big four accounting firm.
Speaking at an event in Sydney, Deloitte Private partner Liz Westover said while limited recourse borrowing arrangements (LRBAs) are safe for now following the Coalition win, the government will still be pushing ahead with its amendments for LRBAs.
The amendments will mean that the borrowing amount of the loan is added to an individual’s total superannuation balance for certain SMSFs.
Despite the Cooper Review in 2010 coming to the conclusion that a review of LRBAs should be conducted, Ms Westover said, the government has never actually conducted a comprehensive review of borrowing in super.
“It has been pushed back and pushed back. So, the government never really had a good look at them and whether they are appropriate in the system,” she said.
“My view is that they need to decide whether they’re in or they’re out, and if they’re in, then let’s get some proper legislation around them and put the rules in place that actually make them practical for people to use.”
She questioned some of the current requirements currently in place for LRBAs including the need to have a bare trust set-up.
“I don’t see why we need to have this bare trust. Now I’m not a lawyer, but I don’t see why there needs to be this structure around the assets being held on trust for the fund,” she said.
“Why can’t the fund just own them directly? Wouldn’t that make them a lot simpler?”
The government needs to make a decision on whether it wants to keep LRBAs or not and have a good look at the rules around them, she explained.
“If they don’t want to allow them, then let’s just get rid of them and be done with it, instead of this constant analysis and people getting caught out on technical issues with LRBAs,” she 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 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.