Newsletter
February 2015 Newsletter
Borrowing by superannuation funds under scrutiny
Late last year, the Murray Financial System Inquiry called on the Government to restore the general prohibition on direct borrowings by superannuation funds.
The review was of the view that there was an emerging trend of superannuation funds using limited recourse borrowing arrangements (LRBAs) to purchase assets, and that over time growth in direct borrowing would pose risks to the financial system.
The Inquiry, chaired by David Murray, recommended that the current superannuation borrowing exception in the super rules should be removed on a prospective basis. Importantly, it was recommended that superannuation funds with existing borrowings should be permitted to maintain those borrowings. However, funds disposing of assets purchased via direct borrowings would be required to extinguish any associated debt at the same time.
The Government is expected to respond to the recommendations in late March 2015.