It’s good news! Self-Managed Superannuation Fund borrowing has been given the green light to continue by the Government despite the FSI report.
In December 2014, the Financial System Inquiry (FSI) released a report recommending the Government remove the exception to the general prohibition on direct borrowing for Self-Managed Superannuation Funds (SMSFs). The FSI report cited concern that direct borrowing, over time, would result in increased risk in the financial system.
Since that date, there has been a lot of speculation surrounding the Government’s pending response.
Good news has come: Self-Managed Superannuation Fund borrowing has been given the green light by the Government and will continue for now.
SMSF borrowing to continue
The Government released a statement in October 2015 advising that whilst there have been anecdotal concerns about lending to SMSFs, at this point in time there is insufficient data to justify significant policy intervention. The Council of Financial Regulators and the Australian Taxation Office (ATO) have however been commissioned to monitor leverage and risk in the superannuation system and report back in three years. Results of that data collection will be considered and any forthcoming changes to borrowing regulations will be decided at that time.
Whilst it seemed that SMSF borrowing would be banned, the confidence shared in the industry by the Government has provided further strength to those seeking to take advantage of borrowing opportunities. Any SMSFs hoping to purchase over the past 12 months who struggled to get finance, or those with off-the-plan purchases unable to draw down on their loan can now take the next step to borrow as needed.
Even though that’s a green light from the government, be sure to seek advice as you take each step in relation to your SMSF borrowing.
For more details on self managed superannuation funds borrowing contact Paris Financial today.
Bec Mackie, Partner, Paris Financial