The Federal Government’s response to the Financial System Inquiry (FSI) report is a strong endorsement of the SMSF sector, says Olivia Long, CEO of the SMSF administrators Xpress Super and SuperGuardian.
“The simple fact that the only full recommendation made by the FSI that was rejected out of hand by the Government – to ban limited recourse borrowings arrangements (LRBAs) – suggests the Government and its regulatory advisers believe the SMSF sector is in healthy shape,” said Ms Long.
“What is really reassuring is that the Government did not listen to all the hype in the market about LRBAs, but instead took the time to get the facts and reach the logical conclusion that they don’t pose a systemic risk to the financial system.
“In the Government’s response to the FSI, it did draw attention to some ‘anecdotal concerns’ with LRBAs, but rightly ruled out acting on those ‘concerns’ because there was no concrete evidence that demanded a change in policy.”
Long says LRBAs now comprise about 2.5% of all SMSF assets, and at that level no one can logically argue it represents a systemic threat to the system and some commentators would gave us believe.
“When you add the facts that financial institutions are hardly falling over themselves to get into the LRBA market (some major lenders have either left or wound down their activity), that the banks are setting conservative loan-to-value ratios, and the housing market, more generally, is slowing down, then it’s hard to argue with the Government’s decision.”
Long says that the Government’s recommendation for the Council of Financial Regulators and the ATO to monitor LRBA activity and report back in three years was “prudent”.
“It’s worth remembering that the Cooper Inquiry made a similar recommendation in 2010, and the upshot was that LRBAs were largely found to performing in the right manner.
“There has been a lot of media speculation around property spruikers and SMSFs, and how the unwary are being preyed upon. No doubt there is an element of that, but not to the degree we have been lead to believe, and, where it has been occurring, ASIC has been cracking down hard – just as it should do.”
Long also praised the decision by the Government to give a legislative framework to superannuation.
“As the primary vehicle for people’s retirement income goals, the more certainty we build into the system, the more confidence people will have in it. This country has devised a superannuation system that actually works, and having its goals set in legislation will simply enhance that.”
About SuperGuardian, Xpress Super
SuperGuardian is a Chartered Accounting firm and specialist self-managed super fund (SMSF) Administrator, with more than 12 years industry experience.
Xpress Super is a self-managed super fund service that relies on the latest technology to provide a very sophisticated SMSF administration offering at a quarter of the average fee.
For more information, please contact
Simrita Virk at Shed Media
M: 0434 531 172