One of the country’s largest lenders has revealed that it has already commenced planning for government changes to SMSF lending.
St George Bank’s general manager of mortgage broking Clive Kirkpatrick urged brokers across the country to take advantage of SMSF lending while it still exists, but to be aware of future changes.
“You have to optimise your business while the opportunity is in front of you but you have also got to be aware of how things will change around you and how they will impact your business,” Mr Kirkpatrick told Mortgage Business.
“That is what we are thinking about in terms of self-managed super,” he said. “It is in our mind as if they do make the change.
“It depends what the government will accept, what level of change. They may not scrap it completely; it may just be restricted to commercial property.
“We know that certain brokers are reliant on investors and if things change, how will that affect their business?”
In the meantime, St George has streamlined the SMSF lending process for brokers in a bid to boost business before any changes are made.
This week new system enhancements came into effect for the lender’s SMSF products, including the removal of a financial advice certificate requirement.
A new online super fund calculator has also been launched, which allows brokers to use data from the calculator in their applications through auto-transfer of data to the application.
Mortgage Success director and mortgage broker Katrina Rowlands said she feels no need to plan for future changes as the SMSF space has never been a target market for her business.
“I don’t target one field of business, so I don’t have to manage my business around those changes,” Ms Rowlands told Mortgage Business.
“The day that SMSF became a selling tool for a broker or a bank, my view is that it was always going to lead to wrong behaviours,” she said.
“If it is a solution that suits a client’s individual needs and individual matters, that always has to be the priority.”
Ms Rowlands believes SMSF loans were targeted because they became marketing and investment vehicles.
“It took the profile off the property having to be the mainstay of what the decision was,” she said.
“It became a tax benefit and the property was a consideration, but it didn’t matter what it was worth or if it would be that long term.
“It became too diluted in what it should achieve in every case required.”
Ms Rowlands, who offers SMSF loan solutions to her clients, said that while she enjoys having the facility and capability of meeting a client’s needs on that lending type, she would never use it as a sales or marketing tool.
My Mortgage Freedom’s Anthony Albakov, a Melbourne-based broker who employs an SMSF specialist, does not believe SMSF lending will be scrapped.
“It is something that is a bit of a buzz topic and unfortunately it has been the property spruikers and the people providing the wrong advice around SMSFs,” Mr Albakov said.
“But for the majority there are some sound strategies for tax minimisation and capital gains exemption to invest through an SMSF,” he said.
“I don’t believe it will go. I just think they need to stamp out the spruikers and the people providing the wrong advice to those with minimum funds in their super.”
On Monday, Treasury released draft legislation that will provide some clarity to limited recourse borrowing arrangements (LRBAs).
One industry lawyer labelled the changes a “positive” move for SMSFs.
DBA Lawyers’ director Bryce Figot explained that for a trustee of a superannuation fund to be allowed to borrow, the asset must be held on trust for the trustee of the superannuation fund.
“Accordingly, the legal owner of [the] asset might be one entity, and that entity executes a deed confirming that it owns the asset as a trustee for the trustee of the superannuation fund. In other words, the asset is not actually registered in the name of the trustee of [the] superannuation fund,” Mr Figot said.
Although the insertion of the bare/holding trust is necessary in order to comply with the LRBA laws, it can cause taxation issues, Mr Figot said.