The federal opposition has claimed the government is trailing the banking sector by not banning limited recourse borrowing arrangements (LRBA) after the latter ceased offering loans under the arrangements.
The claim was made by opposition treasury spokesman Chris Bowen who maintained the Labor Party’s position that it would ban LRBAs, in keeping with the recommendations of the 2014 Financial System Inquiry (FSI), if it wins the upcoming federal election.
Bowen, who was speaking at an industry conference, said Labor had committed to banning LRBAs four years ago after the release of the FSI report and criticised the government for not adopting the recommendation.
“You know a government is behind the curve when the major banks are out in front on this issue reforming their own borrowing programs for SMSFs,” he said.
“As it stands it will be left to a Labor government to take the responsible decision and adopt the recommendation of the Financial System Inquiry – a report delivered years ago – to restore the prohibition on direct borrowing by superannuation funds on a prospective basis.”
He pointed to the release of a joint report from the ATO and Council of Financial Regulators (CFR) late last week as further justification for the banning of LRBAs, despite the report claiming there was no systemic risk to the superannuation system from LRBAs within SMSFs.
The report highlighted that LRBAs had implications for the security of individuals’ retirement savings, and the ATO and CFR noted banning their use would address risks stemming from shifts in the property market for those with high levels of leverage and a low diversification of assets, he said.
He also criticised Treasurer Josh Frydenberg, claiming he had downplayed the concerns of the ATO and CFR in not taking any further action at the current time.