SMSF recommendations “unhelpful and self-defeating”

SMSF recommendations “unhelpful and self-defeating”

Posted on Wednesday, December 10 2014 at 4:39 PM

A recommendation to abolish leveraging in self-managed super funds (SMSF) has received stern criticism from advisory firm Chan and Naylor.

The accounting and wealth advisory group says taking away the opportunity to borrow within SMSFs means many Australians won’t be able to purchase
long-term growth assets that pay for their retirement.

“The Financial System Inquiry’s (FSI) recommendation that the government
consider abolishing the ability to leverage debt within self-managed super
funds is unhelpful and self-defeating counsel that ignores Australia’s future
retirement needs and reflects the ongoing hypocrisy of the broader financial
services sector.”

The FSI suggested the action in order to improve
SMSF resilience in the wake of the GFC.

Ken Raiss, managing director at Chan
Naylor, says rather than discouraging investors by restricting borrowing,
government needs to look at encouraging more investment via SMSFs.

“With Australia’s welfare safety net already
under severe strain, more Australians must be encouraged to prepare for an
independent retirement, and being able to purchase and retain an asset that
grows in value over the next 30 years within a prudently managed SMSF is an
excellent way of achieving this outcome.”

Raiss also says the recommendation is
hypocritical as the same rules won’t apply to geared managed funds dealing in
securities and shares.

“The ultimate irony is that should these funds
implode for whatever reason, then it is the Government who will be left to pick
up the pieces via tax payer funded compensation arrangements,” he says.

“Clearly as money devalues and the cost of
living continues to increase, being able to purchase and retain a growth asset
within super is an excellent means of accumulating wealth to contribute towards
an independent retirement.”

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