The federal government is consider banning borrowing by self-managed superannuation funds (SMSF) to protect retirement savings.
SMSFs, which now hold one-third of Australia’s $1.8 billion in superannuation, are currently allowed a limited form of borrowing.
However, there are concerns that that these funds are increasingly taking on debt to buy houses in a volatile market and that some funds are in danger of being overloaded with one asset – property.
The Australian Financial Review says Assistant Treasurer Josh Frydenberg is considering a ban on borrowing by SMSFs.
According to the AFR, he will say tomorrow in an address to an SMSF Association conference in Melbourne: “We need to get the policy setting right and bear in mind that a valid consideration that super is intended to generate a reliable and sustainable retirement income.”
David Murray’s Financial System Inquiry warned about super borrowing, saying it could “pose a risk to the financial system”.
The Reserve Bank also has warned about borrowing for property within super funds.
The amount of funds borrowed by SMSFs has increased almost 18 times in five years but is small compared to the combined size of self managed funds, about $660 billion. The latest numbers show loans at $8.7 billion.
Mr Frydenberg says the government will consult with all parties to ensure the best long-term interests of consumers.
Read the AFR story here.