AccountantsDaily recently asked 288 accountants, “Do you agree with the FSI's recommendation to ban direct borrowing in SMSFs?” to which 186 (65 per cent) said no.
In December last year, the FSI recommended the removal of the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds.
The FSI acknowledged the level of borrowing is currently relatively small, but suggested that if direct borrowing by funds continues at current growth rates it could pose a risk to the financial system.
However, Taxpayers Australia superannuation products and services manager Reece Agland recently told AccountantsDaily’s sister publication, SMSF Adviser, he expects any possible ban to face strong resistance.
“I think there’ll be a big fight over banning loans in SMSFs; the SMSF sector is quite happy with it. There’ll be a big push from the industry and retail funds to ban loans to SMSFs – it’ll be an interesting year in 2015 between the SMSF sector and the other super sectors.”
Mr Agland said Taxpayers Australia believes that borrowing should be permitted within SMSFs and the organisation will join the fight to ensure the right to borrow is retained – albeit under tighter regulation.
“We will be lobbying to retain borrowing in super in SMSFs, but our view is that borrowing for an SMSF should be a financial product and covered by the Financial Services Act. We think that’s a better way regulate the issue of loans.
“A lot of the loans are fine, but we need to make sure that people aren’t getting caught up by property spruikers. So the best way to do that is to make it a financial product and bring in the best interests duty.
“I think a ban is extreme. There hasn’t been a sign to say that they’re listing bad loans or that people don’t know what they’re doing. There’s just some concern that some of the advice given isn’t the best advice.
"The best way to address it is not through a ban, but through regulating it better.”
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