Limited recourse borrowings arrangements (LRBAs) have survived another attempt to ban them with the Government’s decision to categorically rule out the Financial System Inquiry’s (FSI) recommendation to abolish them. The Association’s Managing Director/Chief Executive Officer Andrea Slattery says: “We fully support the Government’s position. It’s always been our firm conviction that LRBAs don’t pose any systemic risk to the financial system – and the Government agrees. “Although the Government’s response to the FSI says it does have some ‘anecdotal concerns’ with LRBAs, it does not consider there is sufficient data to justify any policy intervention. “The Government does recommend the monitoring of LRBAs by the Council of Financial Regulators and the ATO to review any risks associated with LRBAs, and to report back in three years. This is a similar recommendation to the Cooper Inquiry in 2010; we supported it then and support it now and it is line with current government monitoring procedures.”
Slattery says the timing of the review will allow improvements to the data collection about the proportion of SMSFs that have LRBA arrangements.
“It currently constitutes about 2.5% of all SMSF assets, a percentage of assets we believe does not pose a systemic threat to the system and justifies retaining the status quo.”
She says the Government’s decision to accept the FSI’s proposal to enshrine the objectives of the superannuation system in legislation and to report publicly on how the proposals are consistent with achieving its long-term retirement savings goals is to be applauded.
Industry bodies have commended the federal government’s decision to allow limited recourse borrowing arrangements (LRBA) to continue within super funds. The SMSF Association (SMSFA) said it fully supported the government’s decision, made as part of its response to the Financial System Inquiry (FSI) yesterday.
“It’s always been our firm conviction that LRBAs don’t pose any systemic risk to the financial system and the government agrees,” SMSFA chief executive Andrea Slattery said. “The government does recommend the monitoring of LRBAs by the Council of Financial Regulators and the ATO to review any risks associated with LRBAs, and to report back in three years. “This is a similar recommendation to the Cooper inquiry in 2010 – we supported it then and support it now. “It is in line with current government monitoring procedures.”
Slattery said the government’s response to the FSI was a positive for both the financial services and superannuation sectors and the SMSFA looked forward to working with Treasurer Scott Morrison and Assistant Treasurer Kelly O’Dwyer in implementing the reforms.
Read more at: Financial Observer
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