The Greens have announced a policy of banning superannuation funds from borrowing to invest in property.
The Greens banking and finance policy says: “The Greens would also follow the recommendation of the Murray inquiry and prohibit superannuation funds from direct borrowing to invest in housing. This recommendation was ignored by the government despite the warning that this could pose a risk to the financial system.”
The Financial System Inquiry (FSI), sometimes referred to as the Murray Inquiry, did recommend banning direct borrowing by superannuation funds, though didn’t confine it to borrowing for property: “Remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds.”
The Greens policy would particularly target SMSF Limited Recourse Borrowing Arrangements (LRBAs). The interim report of the FSI noted that: “Leverage in APRA-regulated funds is small, with total borrowings of under $2 million reported each quarter over the past year.”
The Coalition Government rejected the FSI recommendation to ban most forms of borrowing by superannuation funds.
“The Government does not agree with the Inquiry’s recommendation to prohibit limited recourse borrowing arrangements by superannuation funds,” said the Government’s response to the final FSI report.
“While the Government notes that there are anecdotal concerns about limited recourse borrowing arrangements, at this time the Government does not consider the data sufficient to justify significant policy intervention.”
“The Government will however commission the Council of Financial Regulators and the Australian Taxation Office (ATO) to monitor leverage and risk in the superannuation system and report back to Government after three years.”
“This timing allows recent improvements in ATO data collection to wash through the system. The agencies’ analysis will be used to inform any consideration of whether changes to the borrowing regulations might be appropriate.”