Government likely to restrict but not ban SMSF borrowing

SMSF borrowing, LRBA, Financial System Inquiry, Assistant Treasurer Josh FrydenbergIt appears increasingly likely that the Government will not adopt the recommendation of the Financial System Inquiry to ban most forms of direct leverage by superannuation funds, including SMSF Limited Recourse Borrowing Arrangements (LRBAs).

The AFR is reporting that Assistant Treasurer Josh Frydenberg told The Australian Financial Review Banking & Wealth Summit that the Government intends to place limits on SMSF borrowing, but will not ban it.

The final report of the Financial System Inquiry (FSI) recommended:

Direct borrowing by superannuation funds

Remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds.

Mr Frydenberg did not go into detail of what measures the Government was considering, saying “we will announce what we do there when we respond to David Murray but it is certainty a live issue.”

It is expected the Government will respond to the FSI report by mid-year.

The FSI panel also recommended a majority of public-offer superannuation fund boards be comprised of independent directors. The AFR says Frydenberg “hinted” the Government will instead adopt a level of one-third independent directors, which was one of the recommendations of the Cooper Review.

Mr Frydenberg also reiterated that family homes won’t be included in the age pension assets test and indicated the Government wouldn’t change the franking credits system.

See: Budget 2015 rumours: Superannuation & SMSFs

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