Following from the recommendation of the Financial System Inquiry to ban leverage in superannuation funds, will the Government follow through and ban SMSF borrowing?
Firstly, to clarify what the Financial System Inquiry (FSI) said, the final report recommended banning most forms of direct borrowing in superannuation funds, not only SMSFs. However, as noted in the interim report, direct borrowing in APRA-regulated super funds is very low, at less than “$2 million reported each quarter over the past year.” So, effectively, the recommendation is to ban SMSF borrowing.
There will still be some forms of borrowing allowed if the recommendation is implemented. The FSI recommendation is to remove section 67A from the SIS Act. This is the section which allows Limited Recourse Borrowing Arrangements (LRBAs). Section 67 would remain, which allows some borrowing under very limited circumstances, largely for liquidity purposes.
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