The Institute of Chartered Accountants (ICAA) has acknowledged growing industry calls for a review into borrowing within self-managed superannuation funds (SMSFs).
The ICAA's superannuation specialist, Liz Westover, acknowledged the growing discussion about borrowing in SMSFs following her organisation's recent SMSF conference, saying many people had noted both media coverage and Australian Securities and Investments Commission (ASIC) discussion around property spruikers pushing people into SMSFs inappropriately to borrow for real estate or overseas holidays.
"As most people would appreciate, borrowing should be the last thing people consider when deciding whether to set up an SMSF," she said.
Westover said the former chairman of the Cooper Review, Jeremy Cooper, in his 2010 report stated that he did not believe that borrowing was consistent with Australia's retirement incomes policy.
"However, at the time the rules around borrowing were fairly new and the Government had recently announced additional consumer protection measures," she said.
"His (Cooper's) recommendation, therefore, was for a review to take place in two years' time. This should have been last year.
"Borrowing can be a very useful tool, when used appropriately, as a means of increasing retirement savings. However, some of the trends seem to indicate that it is not always being used appropriately," Westover said.
She said while there had been some suggestions that borrowing arrangements made up such a small part of overall assets held in SMSFs that there was no need to worry, the industry should not be waiting for it to become a major problem.
"We are seeing the warning signs now, so a review is warranted," Westover said.
Originally published by SMSF Essentials.
