It 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.
Gov will crack down on borrowing by SMSFs but will not follow a recommendation of Murray inquiry to ban it outright: Frydenberg #smsf
— Sally Patten (@sallympatten) April 29, 2015
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.
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