Financial System Inquiry (FSI)

Articles relating to the Financial System Inquiry (FSI), also know as the Murray Inquiry, including the interim and final reports, superannuation-related recommendations and submissions to the inquiry and to Government.

SMSF borrowings should be grandfathered under ban: Westpac

Westpac, Financial System Inquiry, SMSF borrowing ban, LRBAWestpac says existing SMSF borrowings should be grandfathered, if the Government follows through with the Financial System Inquiry recommendation to ban most forms of borrowing by superannuation funds.

“Westpac agrees with the Final Report’s observation that a largely unleveraged superannuation system provided a stabilising influence on the broader financial system and economy during the GFC,” said the submission in response to the final report of the Financial System Inquiry (FSI).

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FPA recommends review, not ban, for SMSF borrowing

FPA, SMSF borrowing ban, LRBA, Financial System InquiryThe Financial Planning Association of Australia (FPA) says the Government should conduct a review of SMSF borrowing, rather than follow the recommendation of the Financial System Inquiry and ban superannuation funds from borrowing.

The FPA does not support the recommendation of the Financial System Inquiry (FSI) final report to ban most forms of direct leverage by superannuation funds, including SMSF Limited Recourse Borrowing Arrangements (LRBAs).

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AIST rejects choice of super fund for all employees

AIST, Financial System Inquiry, choice of fund for employeesThe Australian Institute of Superannuation Trustees (AIST) has rejected the Financial System Inquiry recommendation of extending choice of super fund to all employees.

“Beyond the Final Report’s general statement of belief that everyone should be able to choose the fund that receives their SG contributions, the Inquiry has not made out the case in support of this recommendation,” says the AIST submission in response to the Financial System Inquiry (FSI) final report.

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SMSFA proposes reforms instead of SMSF borrowing ban

SMSF Association (SMSFA), SMSF borrowing ban, LRBA, Financial System InquiryThe SMSF Association has proposed a “suite of measures” as an alternative to banning SMSF Limited Recourse Borrowing Arrangements (LRBAs).

The Financial System Inquiry (FSI) recommended a ban on most forms of direct leverage in superannuation, including SMSF LRBAs, for two reasons. Because the objective of superannuation should be as a vehicle for retirement savings, not wealth management, and to “prevent the unnecessary build-up of risk in the superannuation system and the financial system more broadly.”

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Have people got the FSI SMSF LRBA recommendation wrong?

Financial System Inquiry (FSI), ban SMSF borrowing recommendation, LRBAOpinion – With submissions in response to the final report of the Financial System Report now closed many people appear to have missed the point of the recommendation to ban most types of direct borrowing in superannuation, including SMSF Limited Recourse Borrowing Arrangements (LRBAs).

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

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

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Actuaries call for legislated objectives for superannuation

Financial System Inquiry (FSI), Actuaries Institute, legislated objectives for superannuationThe Actuaries Institute has called on the Government to implement several of the recommendations of the Financial System Inquiry.

The Institute, in a submission in response to the final report of the Financial System Inquiry, has supported the recommendation for a legislated objective for superannuation and the pre-selection of income products to combat longevity risk.

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Will the Government ban SMSF borrowing?

Ban smsf borrowing, LRBA, Financial System InquiryFollowing 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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