KPMG has questioned the need for a ban on leverage in SMSFs, saying “issues associated with SMSF leverage can be overcome or mitigated through effective financial advice, clear and concise guidance materials, and through a robust annual audit”. This is one of KPMG’s recommendations in a second submission to the Financial System Inquiry (FSI).
Instead of a ban on SMSF borrowing KPMG thinks there are a number of measures that could reduce the risks associated with leverage in SMSFs, including:
- a focus on advice relating to SMSFs, to check recommendations to set up SMSFs are appropriate
- additional guidance by APRA in relation to credits risks where SMSFs may be “borrowing to purchase poor quality assets”
- expanding protections under the Australian Credit Law to LRBAs