Today, the Government response to the “Financial Systems Inquiry Report” (“FSI”) was released and its good news for SMSFs.
The Government responded to all FSI’s 44 recommendations and did not agree with the recommendation to ban SMSF Loans. While highlighting concerns around SMSF Loans – the Government did not consider current data sufficient to ban SMSF Loans.
Are we out of the woods yet?
For now – yes we are out of the woods. The Government highlighted that the Council of Financial Regulators and the Australian Taxation Office (ATO) will monitor leverage and risk in the superannuation system and report back to Government after three years. Given the Government rejected the FSI recommendation to ban SMSF loans based on current data, there will need to be a significant change for the Government view to change.
So is it good news?
Yes, it is – particularly for SMSF investors who have invested in off the plan purchases and have been left with uncertainly on whether SMSF Loans will be available at settlement.
How are APRA’s Capital Requirements impacting SMSF Loans?
Make no mistake, APRA’s crackdown on banks and investment loans has impacted SMSF Loans. A number of lenders have exited the SMSF Loans space and there has been a significant revision in “Loan to Value” (“LVR”) ratios as well as serviceability calculators with many lenders – with certain lenders excluding Off the plan purchases altogether. There are still a few favourable lenders that provide 80% LVR and allow off the plan – so breathe easy, be sure to contact a Redwood Broker for the right SMSF Loan to suit your needs.
Where to from here?
SMSF Loans are here to stay and are just small piece over the $1.8 trillion superannuation pie. SMSF loans will be a niche for lenders and brokers alike, highlighting the importance of understanding SMSF Rules and Regulations when submitting an SMSF Loan.
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