The following letter to the Australian Financial Review on SMSF borrowing has been issued by John Marony, Chief Executive of the SMSF Association:
SMSF borrowing misinformation
In “Time to outlaw borrowing by self-managed super funds” (July 7) (PDF), Karen Maley has misinterpreted the latest statistics from the Australian Taxation Office (ATO) on the level of SMSF borrowings.
The actual level of borrowings as of December 2019 was $25.1 billion, not $44.95 billion, as Ms Maley’s figure included the assets against which those borrowings were secured. Hence, the borrowings represent only 3.5 per cent of total net SMSF assets in 2019 compared with 3.3 per cent in 2015. Intello has reviewed the ATOs December 2019 statistics here.
Such low levels of borrowing did not concern the Productivity Commission in 2018 when it stated in its final report into superannuation that “such borrowing does not currently pose a material systemic risk”.
We support the commission’s finding that “concerns about SMSF borrowing arrangements being utilised by members that lack the requisite financial literacy to properly understand the risks associated with them … are best dealt with through measures to improve the quality of SMSF-related advice” and its recommendation to “require specialist training for persons providing advice to set up an SMSF”.
We share Ms Maley’s concern about the use of personal guarantees and would like to see them reduced or eliminated. We also support the regular monitoring by the Council of Financial Regulators and the ATO of leverage and risk in the superannuation system to ensure that no material systemic risk emerges.
John Maroney, chief executive