No borrowing ban likely for SMSF: Josh Frydenberg suggestion

No borrowing ban likely for SMSF: Josh Frydenberg suggestion
No borrowing ban likely for SMSF: Josh Frydenberg suggestion

The Assistant Federal Treasurer Josh Frydenberg says he has been troubled by stories of property spruikers pushing people to set up an SMSF so they could borrow against their retirement savings to make speculative property investments. 

However he said such events were the exception rather than the rule so he has given the strongest signal yet that the Abbott Government will not implement a recommendation to ban do-it-yourself super funds from borrowing to invest in property.

"In the final report of the financial system inquiry, which the government commissioned David Murray to prepare, he recommended a complete ban on limited recourse borrowing arrangements in SMSFs," Assistant Treasurer Josh Frydenberg said on Friday as reported by Fairfax Media from the Tax Institute annual superannuation conference in Sydney.  

"I want to emphasise that we have been considering this recommendation very carefully but flag that we want to make sure the approach we take is proportionate to the risks that have been identified."

"To put it in context only 0.07%, perhaps 6,500 properties, were held in an SMSF through a limited recourse borrowing arrangement in 2013," he said.

"David Murray highlighted the risks associated with increased leverage in the financial system. Increased leverage always represents a risk and we recognise that. The government also recognises that most SMSFs do the right thing". 

Tightening the rules around how SMSFs can borrow to invest, instead of placing an outright ban on the practice, remained "under consideration", he said.

Asked whether he thought targeting action against property spruikers was a better solution than limiting the SMSF borrowing rules Josh Frydenberg said that was certainly an option.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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