The SMSF Owners’ Alliance has been highly critical of proposed changes to how Limited Recourse Borrowing Arrangements (LRBAs) are treated, suggesting it may be an attempt to effectively ban SMSFs from borrowing.
Treasury briefly consulted publicly on draft legislation to include LRBAs in the Transfer Balance Cap and Total Superannuation Balance regime. The SMSF Owners’ Alliance (SMSOA) has criticised the legislation and the surrounding process in a submission.
The SMSFOA is critical of the amount of time allowed for public comment on the draft legislation.
“It has become routine in our submissions to Treasury on changes to superannuation to start by noting the unreasonably short time allowed for comment on complex legislation. We have to do so again as just four working days have been allowed for comment on the proposed Bill,” says the submission.
“It is not conducive to good policy making to allow such little time for comment on legislation.”
The SMSOA also questioned the need for the changes.
“It seems the Bill is intended to prevent attempts by fund members to increase the value of their pension account and circumvent the total superannuation balance cap on non-concessional contributions. However, it is not known yet whether this will be a real problem and the Government has not produced any evidence of the need for it.”
“This pre-emptive legislation will add another chapter to the complex changes to superannuation that were made at the end of last year and have yet to take effect.”
The SMSFOA says it could be concluded that the aim of the proposed Bill was to make the use of LRBAs so difficult that they stop being used.
The draft legislation is, according to the submission, complex to such an extent that it is unclear what it does.
“The Explanatory Memorandum explains the purpose and workings of the Bill in a very complex way that is hard to follow. Even expert practitioners we have contacted in the past few days are still unsure of what the Bill means and what its practical effects will be,” says the SMSFOA.