Moves to restrict the use of limited recourse borrowing arrangements (LRBA) inside SMSFs for residential property acquisitions are based on a decade-old inquiry recommendation that has been addressed by sector changes, a non-bank lender has claimed.
Pepper Money chief executive Mario Rehayem noted that in announcing the restriction, the government referenced a recommendation from the 2014 Murray financial system inquiry report without any recent consultation with the sector.
Rehayem added that recommendation, which has been acted upon by the government to secure Greens support for its budget bill, was made before reforms to superannuation governance, the oversight of SMSFs, macroprudential settings and lending standards.
“This change by the government is not based on current evidence. It responds to yesterday’s market, not today’s,” he said.
“The system has evolved, the guardrails are stronger and the rationale for a blanket ban does not stack up.
“This change does not target residential property speculation and will not move the dial on housing affordability.”
The non-bank lending sector has highlighted most residential property LRBAs were not taken out by wealthy speculators or professional investors, but they will now be the only people capable of buying property in an SMSF as the law still allows outright purchases.
As such, calls have been made to limit the number of residential LRBAs allowed in an SMSF.
“If the government is determined to act, a more proportionate approach would be to allow borrowing for a single residential property within an SMSF,” Rehayem said.
“This would preserve diversification, maintain appropriate guardrails, support trustee choice and better align with the government’s stated objectives.
“This policy was introduced without consultation, detailed modelling or evidence of systemic risk. It should be reconsidered before it materially reduces Australians’ capacity to build sustainable retirement savings.”
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