The Institute of Chartered Accountants Australia has waded into the debate about gearing in self-managed superannuation funds, commending the government’s plans to review the sector in light of its $80-billion splurge on property in the last six years.
Head of superannuation at ICAA, Liz Westover, acknowledged that borrowing to invest could be a useful way of boosting retirement savings. However, she said trustees needed to ensure that it was used appropriately for quality investments.
“We need to be looking at the policy framework relating to borrowing within SMSFs and whether, given unprecedented growth in the sector, it will continue to be appropriate,” she said.
“The Cooper Review found a review into borrowing in SMSFs was needed within two years. The government is right to look at undertaking such a review.”
Westover called for the regulators to pay greater attention to the quality of advice available to consumers in relation to setting up and operating an SMSF and, in particular, in relation to borrowing. She added that gearing should be the last thing people consider when deciding whether to set up an SMSF.
Her comments follow concerns raised by the Reserve Bank of Australia on Wednesday that the flow of money from SMSFs could overheat the property market, and investors who gear up to buy investment properties should not count on the big gains of the late 1990s and 2000s.
Subsequently, the Abbott government has flagged plans to review the sector to ensure SMSFs don’t have an unfair advantage over industry, retail and corporate super funds.
Westover echoed comments made by Assistant Treasurer Arthur Sinodinos this week that Australians should ensure the ultimate objective of their superannuation is to preserve and maximise retirement savings.
