The Council of Financial Regulators is due to provide a report on leverage and risk in the superannuation system after concerns about the prevalence of property in low-balance self-managed super funds (SMSFs)
The body was the co-ordinator for Australia’s main financial regulatory agencies with the objective to promote stability of the Australian financial system and support effective and efficient regulation.
In a quarterly update, the organisation said it had completed its review of leverage and risk in the super system with a focus on limited recourse borrowing arrangements (LRBAs).
These LRBAs allowed a fund to borrow to purchase as asset with the lender’s rights limited to that asset if the loan defaulted.
This had been conducted in conjunction with the Australian Taxation Office following a request by the Morrison Government.
An earlier report of the subject had been conducted in December 2019 with the report concluding, at the time, there were concerns about the prevalence of property as a main asset purchased under an LRBA by low-balance SMSFs with little investment diversification.
It recommended further monitoring to track the future growth of leverage and identify risks within the SMSF environment.
A report of the review’s findings would be provided “in the near future”.
