The industry funds and the SMSF Association have found themselves at loggerheads over the future ability of self-managed superannuation funds (SMSFs) to undertake borrowing arrangements.
While the SMSF Association has rejected last week’s Australian Labor Party policy announcement of its intention to ban or significantly reduce the ability of SMSFs to borrow, both the Australian Institute of Superannuation Trustees (AIST) and Industry Super Australia (ISA) have defended such an approach.
“Banning recourse borrowing by SMSFs was recommended by the Financial System Inquiry with good reason,” AIST chief executive, Eva Scheerlinck said.
“Allowing SMSFs to take on extra risk through borrowing potentially affects everyone as it is the taxpayer who ultimately underwrites this risk through the provision of the Age Pension when things go wrong.”
However SMSF Association managing director and chief executive officer, Andrea Slattery said her organisation remained supportive of limited recourse borrowing arrangements (LRBAs).
“The fact remains there’s little or no convincing evidence that the use of LRBAs by SMSFs is playing a significant role in affecting housing affordability,” Slattery said. “The most recent Australian Tax Office (ATO) statistics show that SMSFs hold $24.3 billion in LRBAs, with these financial instruments being predominantly used to invest in residential and non-residential property in an almost 50-50 split.”
“That estimated $12 billion where SMSFs have used LRBAs to invest in residential housing has to be put in the context of a $6.43 trillion housing market. In other words, LRBAs comprise only 0.18 per cent of the market. On these figures, it’s hard to argue LRBAs are a ‘market mover’,” she said
Slattery said the idea that SMSFs had plunged into property investment in recent times also was not borne out by the statistics, with SMSF residential property holdings (both geared and ungeared) being consistent between four to six per cent of total SMSF assets in recent times.