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Update super borrowing rules: SISFA
Small Independent Superannuation Funds Association (SISFA) chairman Michael Lorimer has called for an end to the "ridiculous" borrowing laws that prevent self-managed super fund (SMSF) trustees from investing in residential property as part of the association's submission to phase three of the Cooper Review into superannuation.
"Because of the way [the current rules] have been drafted they've led to some uncertainties," Lorimer said.
"We would like to see these borrowing rules modified so that their application is less open to being challenged. If the Government thinks that in principle it's okay within the appropriate prudential framework for super funds to borrow then perhaps we should have a look at how those current rules are framed and come out with a simpler set of rules that applies to large funds and small funds alike."
Lorimer used the example of a family who owned a residential investment property but wanted to rollover their super into a SMSF. Under the current laws the family would have to sell the property before rolling over into a SMSF, but the same laws would not apply to a commercial investment, such as those that might feature in larger funds.
"It's a ridiculous scenario - it makes no sense why it can't be transferred," he said. "This is nothing to do with self-managed funds, this is just about having a look at the rules that apply to everyone and making sure they make sense."
Lorimer stressed that SISFA's proposals weren't about making life easier for SMSF trustees, but rather forming a simpler, streamlined legislative framework and having a consistent set of rules for all super funds.
SISFA's other proposals include an increase in the minimum number of members of a SMSF to enable families of more than four people to join the same SMSF, the reversal of the halving of the contribution cap and the streamlining of processes for using electronic systems rather than cheques and paperwork.
Non-budgetary changes such as a change to the borrowing laws could be implemented by the Government immediately, without necessarily having to wait for the completion of the Cooper Review, which might potentially get delayed by a Federal election, Lorimer said.
AUTHOR
Mike Taylor
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