Investors can still use limited recourse borrowing to buy properties (both residential and commercial) in their Self Managed Superannuation Funds.
This is following the Federal Government’s rejection yesterday of the Murray Reviews’ proposal to ban self-managed superannuation funds from borrowing to buy property.
The government has rejected the argument, saying it may be an important issue in the future but is not now, preferring to monitor what is happening rather than prohibiting it.
Treasurer Scott Morrison said yesterday there was insufficient evidence to support an immediate ban on borrowing:
“The information collected on this doesn’t lead us towards that conclusion at this point.”
Interestingly the government accepted virtually all of the other recommendations of the expert panel behind last year’s Financial System Inquiry.
The inquiry had three main issues to deal with:
- The safety of our banking system in the light of the global financial crisis,
- The increasing importance of the superannuation industry to our financial system as a whole, and
- How new technologies and related innovations might impact the system.
Inquiry chair David Murray and his colleagues focused heavily on superannuation, since this sector has become a major part of the financial system.
The banks weren’t so lucky
As expected, the recommendation in David Murray’s FSI to require banks to hold more capital was endorsed.
We’ve already started to see the impact of this with a number of the big banks raising capital through share issues and by increasing interest rates.
The bottom line is that these prudential requirements will create a sounder banking system but will cost shareholders and customers, as those with a Westpac mortgage found out last week.
Of course before you decide to buy a property in your SMSF, please seek appropriate independent advice.
There are strict rules about advising on this financial product.