COMPLIANCE
After the relief
The COVID-19 pandemic saw short-term financial relief measures introduced to make the repayment of limited recourse borrowing arrangements a little easier. Mary Simmons examines the courses of action SMSF trustees must consider now these provisions are coming to an end.
MARY SIMMONS is technical manager with the SMSF Association.
52 selfmanagedsuper
Gearing has always been a popular wealth accumulation strategy, so it is hardly surprising limited recourse borrowing arrangements (LRBA) have been attractive to SMSFs as a way to invest in concessionally taxed superannuation. The raw numbers tell the story. Since their introduction in 2007, LRBA growth has been steady, with ATO annual statistics confirming that in 2018, 10.2 per cent of SMSFs reported an LRBA, up slightly from the 9.5 per cent reported the year before. These LRBAs accounted for 92 per cent of the total value of borrowings reported by SMSFs in 2018, also an increase from the previous year of 89 per
cent. In terms of their dollar value, LRBAs stood at $50.2 billion at 30 June 2020, up 11.1 per cent from $45.2 billion at 30 June 2019. At $50.2 billion, they comprised 7.1 per cent of net SMSF assets. This growth has always attracted criticism. Those opposed to SMSFs having access to this debt instrument primarily argue they pose too much risk, not just to the individual SMSF but the superannuation system. The Cooper review (2010) into superannuation noted those objections, but did not suggest stopping SMSFs from borrowing, although it did suggest a future review. The Financial System Inquiry went a step
