Self-managed super funds (SMSFs) trustees are being encouraged to review their current finance rates after changes to the safe harbour rates benchmark affecting Limited Recourse Borrowing Arrangements (LRBAs).
The standard investor interest rate for residential property, set by the Reserve Bank of Australia and used for the LRBA safe harbour rates, was raised in May from 5.80 per cent to 5.94 per cent.
In light of this rate increase, trustees were urged to look around for the best deal possible to ensure they were getting the maximum retirement benefit available by paying lower expenses.
“We’re seeing a lot of enquiries from trustees and administrators wanting to know their options around lowering the rates and expenses incurred by funds given the rates elsewhere in the market,” said Phil LaGreca, SuperConcepts executive manager of SMSF technical and strategic services.
“Even though official rates are falling, and could possibly fall further, it looks likely that rates for SMSFS with related party loans will be charged higher interest if they follow the guidelines.
“A lot of the banks have pulled out of LRBAs but the gap is being filled by smaller providers who are trying to establish themselves with competitive offers.”
LaGreca added advisers and trustees had a best interest duty to the fund or client which should encourage them to seek the fund with the least expenses.