Stop poor advice not LRBAs: IPA
Limited recourse borrowing arrangements (LRBAs) within Self-Managed Superannuation Funds (SMSFs) are not a threat to Australia's super system, according to the Institute of Public Accountants (IPA).
IPA chief executive, Andrew Conway, said the Financial System Inquiry's proposal to reinstate the banning of LRBAs within an SMSM should be shelved to enable a more targeted approach to addressing inappropriate use of gearing linked to poor quality advice.
"The IPA believes that the issue is not SMSF borrowing per se, but inappropriate advice provided by unlicensed advisers," he said.
"A sledgehammer approach may not be the appropriate way to eliminate the use of poor quality advice relating to SMSF gearing.
"We need better analysis of ways to address the risks surrounding borrowing before merely imposing an outright ban.
"No case has been made, including no evidence presented, that there is a risk to the superannuation system as posed in the final FSI report.
"Interestingly, there are also no alternative measures other than an outright ban to mitigate some of the concerns raised. For example, if they are worried about the diversification, why not consider excluding LRBAs for funds with small balances.
"There is plenty of scope to amend the rules to specifically address all of the issues raised without resorting to a total ban."
AUTHOR
Nicholas O'Donoghue
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
