Coalition says 'no' to ban on borrowing by SMSFs

Category: SMSF   Posted: 25,Mar 2019

The Coalition has recommitted to allowing self-managed superannuation funds to borrow for property despite warnings from regulators that the real estate correction could wipe out the nest eggs of some investors.
A new report by the Council of Financial Regulators and Australian Tax Office raises concerns about limited resource borrowing arrangements (LBRAs) by SMSFs, especially where an asset such as the family home is used as a guarantee.
“LRBAs can represent a significant risk to some individuals’ retirement savings, particularly where they have low-balance SMSFs with high asset concentration and or personal guarantees,” the report says.
“As the majority of LRBAs are used to purchase real property, a property market correction could post a significant risk, in particular where a personal guarantee is involved.”
Responding to the report, the government said on Friday that it was satisfied SMSFs had low levels of leveraging overall and borrowing should be allowed to continue. Most major lenders have already exited the market.
Labor, which has pledged to ban LRBAs by SMSFs, accused the government of playing down the risks to the financial system and individuals.