Insights

From the Editor

They’ve got it in for SMSFs

I know the word hate in the English language is particularly strong in describing an attitude toward a particular subject, but I think we’d all be forgiven if we thought the ruling class in Canberra actually hates the SMSF sector.

I’m not saying this as a victim of the siege mentally seemingly pervading society right now, but when everything that has been implemented regarding superannuation law targets one sector of the retirement landscape and one sector only, it seems to be the only conclusion that can be drawn.

Take the recent developments regarding the treatment of limited recourse borrowing arrangements (LRBA), for example.

First there was the announcement out of the blue the government was looking to amend the superannuation legislation once again to allow assets held in an SMSF under an LRBA to be included in an individual’s total superannuation balance.

LRBAs have always been a great avenue to boost an SMSF member’s retirement savings asset balance without falling foul of the contributions caps.

By having assets held under them count towards a person’s total super balance serves up a double whammy really as not only have they lost this method of improving their superannuation asset balance, they also lose the ability to make further non-concessional contributions if the inclusion of the LRBA asset or assets tip the individual’s total super balance over the $1.6 million line.

Draft legislation for this amendment had just been released at the time of publication and in keeping with its recent modus operandi, Treasury gave just about no time for any meaningful public discussion, with the draft document being published on 27 April and the opportunity to make a consultative submission closing on 3 May. It means the proposal could well fall into the ‘seemed like a good idea at the time’ basket.

This is the treatment from the current sitting government.

Then we saw a separate attack from Labor, calling for an outright ban on LRBAs.

It’s worth reiterating at this point LRBAs and the ability to invest in residential property are the sole domain of SMSFs as far as the superannuation sector goes.

The reasoning behind this proposal is playing yet again on the misconception that SMSFs are overheating the residential property market because they are allowed to borrow money to invest in these types of assets.

This again really is a case of don’t let the facts get in the way of a good story.

As pointed out in its response to this announcement, the SMSF Association noted the most recent ATO statistics showed roughly $12 billion worth of residential property is held by SMSFs under an LRBA, representing a mere 0.18 per cent of the $6.43 trillion Australian housing market.

How these numbers can help prosecute any plausible argument to ban LRBAs because of their effect on housing affordability simply beggars belief.

So it would appear both sides of the house seem hell-bent on nobbling this sector any chance they get.

Forget the fact its members are the most engaged and probably represent the greatest proportion of individuals with the ability to self-fund their own retirement.

With such an agenda emanating from Canberra, is it any wonder SMSF members would begin to lose confidence in the retirement savings system and feel completely betrayed by this country’s elected officials.

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