The SMSF Association and National Party leader Matt Canavan are disappointed with the Albanese government’s decision to support an amendment by the Greens to ban future limited recourse borrowing arrangements (LRBA) for residential property purchases by SMSFs to gain passage through the upper house for its capital gains tax changes announced in the federal budget.
Association chief executive Peter Burgess noted “review after review” has found LRBAs pose no material risk to the superannuation system.
“If property spruikers and high-pressure sales tactics are the issue, the answer is to target that conduct directly and not trade away LRBAs investing in residential property just to secure passage of their federal budget tax measures,” Burgess said in response to the announcement.
In an interview on Sky News, Canavan suggested the deal with the Greens regarding LRBAs made already bad policy worse.
“Keep in mind the large super funds can effectively still expose themselves to borrowing techniques because they’ve diversified enough, they’re big enough to invest in geared entities, invest in derivatives, other ways to leverage investments. The provisions for self-managed super funds were there to help them be on a level playing field. It was limited recourse. It’s worked well,” he explained.
LRBAs only represent a small percentage of total SMSF investments, although many trustees have made legitimate financial commitments based on the existing rules.
“The problem is not the borrowing structure itself, but the conduct of those who aggressively market unsuitable property investments and make unrealistic claims about returns and retirement outcomes,” Burgess indicated.
The industry body called for any changes to LRBA rules to include appropriate consultation and grandfathering provisions or a substantially longer implementation period.
The Greens welcomed the government’s support on the issue to stop what it says are “wealthy property investors buying up tax-advantaged homes”.
