A new law to ban limited recourse borrowing arrangements (LRBA) for residential property inside SMSFs overlooks the causes of consumer harm caused by spruikers and lead generators, an accounting body has stated.
CPA Australia superannuation lead Richard Webb said the changes, announced as part of budget legislation negotiations in the Senate, do not address those who misrepresent LRBAs to consumers.
“While targeting SMSF borrowing may appear to address risks at the surface, it does not tackle where much of the real harm originates – upstream in unregulated lead generation and high-pressure sales practices,” Webb said.
“Consumer harm often begins well before formal financial advice is provided.
“Unregulated lead generators can influence or direct consumers toward particular products or strategies without being subject to the same licensing, conduct and accountability obligations as financial advisers.”
He said CPA Australia, in conjunction with a number of other professional and industry bodies, had called for stronger oversight of lead generators and their activities and suggested they should fall under the financial services licensing framework that applies to advice practitioners.
“If policymakers want to reduce harm, the focus should be on ensuring anyone who meaningfully shapes financial decisions is appropriately regulated and accountable,” he added.
He noted the changes, which ran counter to statements the government would not make any alterations to LRBAs, should be assessed on their unintended consequences for investment choice and retirement planning, and their interaction with other tax changes and housing policy objectives.
“In practice, this would narrow access to residential property investment within super to Australians with significantly larger balances, potentially creating equity concerns across the system,” he said.
“These are significant structural changes. They should be considered on their merits, with a clear focus on consumer protection, system integrity and fairness – not traded off in the context of broader budget negotiations.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason