Limited recourse borrowings arrangements (LRBAs) have survived another attempt to ban them with the Government’s decision to categorically rule out the Financial System Inquiry’s (FSI) recommendation to abolish them.

The Association’s Managing Director/Chief Executive Officer Andrea Slattery says: “We fully support the Government’s position. It’s always been our firm conviction that LRBAs don’t pose any systematic risk to the financial system – and the Government agrees.

“Although the Government’s response to the FSI says it does have some ‘anecdotal concerns’ with LRBAs, it does not consider there is sufficient data to justify any policy intervention.

“The Government does recommend the monitoring of LRBAs by the Council of Financial Regulators and the ATO to review any risks associated with LRBAs, and to report back in three years. This is a similar recommendation to the Cooper Inquiry in 2010; we supported it then and support it now and it is line with current government monitoring procedures.”

Slattery says the timing of the review will allow improvements to the data collection about the proportion of SMSFs that have LRBA arrangements.

“It currently constitutes about 2.5% of all SMSF assets, a percentage of assets we believe does not pose a systemic threat to the system and justifies retaining the status quo.”

She says the Government’s decision to accept the FSI’s proposal to enshrine the objectives of the superannuation system in legislation and to report publicly on how the proposals are consistent with achieving its long-term retirement savings goals is to be applauded.

“This decision will assist in giving the superannuation system greater stability and by enacting the legislation it will enhance bipartisan support for our retirement income system, serving as a guide to the industry, regulators and policy makers.

Slattery says another positive to come from the Government’s response was its support for the retirement phase of superannuation by agreeing to assist develop a suite of comprehensive retirement income products.

“This is essential as we see more people entering the retirement phase and the importance of the ability to draw an income to live on during their retirement.  A framework is to be developed in conjunction with the Tax White Paper process and the Retirement Income Streams review.”

Other benefits for the SMSF sector in the Government’s response are:

  • Decision not proceed with the bank deposit tax and the associated Financial Stability fund. “This is good news for SMSFs as it may have increased the cost of running an SMSF by increasing the bank fees payable on deposit accounts.”
  • Support law reform to classify what is meant by a sophisticated or professional investor.  “We have been concerned with the confusion this has created so we welcome this reform as it will provide greater clarity in relation to access to investments at the retail and wholesale levels for SMSF trustees and investors in general.”
  • Raising the competency of advisers. “We have already seen moves in this direction by the introduction of an enhanced register of advisers, and now there will be improvements to the current information available on the register to ensure the new standards are met.”

Slattery says the Government’s response to the FSI was a “positive” for both the financial services and superannuation sectors, and the SMSF Association looks forward to working with Treasurer Scott Morrison and Assistant Treasurer Kelly O’Dwyer in implementing the reforms.

“The Association also wants to put on record its appreciation to David Murray and his colleagues for the report. It was an excellent piece of work that will continue to have positive ramifications for our financial services sector in the years ahead.”

 

About the SMSF Association:

The SMSF Association is the authoritative voice for the self-managed superannuation fund sector. The Association, which represents professionals providing a range of services across various disciplines in the complex area of SMSFs, is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.

Contact for interviews:

Andrea Slattery

SMSF Association Managing Director/Chief Executive Officer

M: 0417 898 317

E: ceo@smsfassociation.com

Media

Nicholas Way

Shed Media

M: 0409 585 979

E: nway@shedmedia.com.au

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