Accountants and consumers have joined mortgage brokers in opposing the Financial System Inquiry’s attack on SMSF borrowing.
The inquiry’s final report, which was released last month, asked the federal government to restore the general prohibition on direct borrowing by superannuation funds.
A recent survey by Mortgage Business’ sister title, AccountantsDaily, found that 65 per cent of respondents disagreed with the inquiry’s recommendation.
The Financial System Inquiry acknowledged the level of borrowing in SMSFs is relatively small, but said it could one day pose a systemic risk if current growth rates continue.
The mortgage broking industry’s largest association, the MFAA, said it would make a submission to the Financial System Inquiry in defence of SMSF borrowing.
Taxpayers Australia superannuation products and services manager Reece Agland said he expected any possible ban to face strong resistance.
“I think there’ll be a big fight over banning loans in SMSFs; the SMSF sector is quite happy with it,” he said.
“There’ll be a big push from the industry and retail funds to ban loans to SMSFs – it’ll be an interesting year in 2015 between the SMSF sector and the other super sectors.”
Mr Agland said Taxpayers Australia believes that borrowing should be permitted within SMSFs and the organisation will join the fight to ensure the right to borrow is retained – albeit under tighter regulation.
“We will be lobbying to retain borrowing in super in SMSFs, but our view is that borrowing for an SMSF should be a financial product and covered by the Financial Services Act. We think that’s a better way regulate the issue of loans.
“A lot of the loans are fine, but we need to make sure that people aren’t getting caught up by property spruikers. So the best way to do that is to make it a financial product and bring in the best interests duty.
“I think a ban is extreme. There hasn’t been a sign to say that they’re listing bad loans or that people don’t know what they’re doing. There’s just some concern that some of the advice given isn’t the best advice.
"The best way to address it is not through a ban, but through regulating it better,” Mr Agland said.