Proposed Prohibition on Borrowing Arrangements

As you may be aware, the Financial System Inquiry handed down its report on 7th December 2014.

One of the recommendations made was the government should remove "the general prohibition on direct borrowing by superannuation funds".

In recent years there has been an explosion in the number of self managed superannuation funds borrowing to acquire assets, predominately property.

The government has been becoming increasingly concerned that this borrowing is fuelling the property market and heavily impacting affordability.

Although in many cases, borrowing via a Limited Recourse Borrowing Arrangement has been successful for many self managed superannuation funds, it would be reasonable to say that not all borrowing arrangements entered into were suitable to the funds or its members circumstances.

It is important to note that the recommendations of the Financial System Inquiry are not law and there is no indication that the government will act on its recommendations.

We will keep you informed as those matters develop, however should you have any queries on how these proposals may impact you, please do not hesitate to contact your partner on 3210 5500.

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