SMSF loans could leave investors ‘high and dry’: Frydenberg

Assistant Treasurer Josh Frydenberg has revealed his concerns about the effects of leveraging in superannuation in the event of a “major” external economic shock.

Speaking exclusively to Sterling Publishing, Mr Frydenberg said he’s taking a serious look at the Financial System Inquiry’s (FSI’s) recommendation to ban borrowing in SMSFs.

“This is one of the recommendations out of FSI that I am interested in looking at because superannuation is principally a retirement income stream and if people can leverage up, they run the risk that if there is a major external economic shock, they could be left high and dry.

“That’s neither in the interests of the superannuant or the government,” he said.

Mr Frydenberg announced late last month that the government intends to openly consult on this recommendation, and will explore options such as banning personal guarantees by SMSFs and improving the standard of advice given to trustees on leveraged investments.

His comments come after FBAA chief executive Peter White told Mortgage Business that he held discussions with Mr Frydenberg earlier this month during which the assistant treasurer shared his concerns over SMSF lending.

During a private dinner function in Canberra on 25 February, Mr White admitted he was able to have “limited discussions” with Mr Frydenberg and gauge his feelings towards SMSF lending and other issues impacting the Australian mortgage market.

“We had a common thought process in regards to limited liability funding for SMSF loans,” he said.

“It’s a concern and if the data and analysis shows that it’s a growing concern then, depending on further deliberation on that, potentially things need to be done or could be done.

“Just because these loans exist doesn’t mean they should be there. It doesn’t mean they should go either, but it needs a proper thought process behind it.

“He [Frydenberg] is concerned about it.”

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