Financial System Inquiry - Australian Government's formal response to the financial system inquiry
Financial System Inquiry - Good news for LRBAs and SMSFs
In late 2013, the Government established a Financial System Inquiry with a view to exposing potential weakness in our existing system and vulnerability to any future global financial crisis.
The report, based on 180 written submissions from key stakeholders, resulted in 44 recommendations to foster a resilient financial system over the next 10-20 years. The full report can be read here.
The Government's response to the inquiry was one of acceptance, essentially green lighting all recommendations bar one - the suggested prohibition on limited recourse borrowing by super funds.
It's good news for investors looking to leverage the returns of the property market from their SMSFs - although the Government will be keeping a close eye on activity over the next three years.
The full response can be read here, however below are some interesting snapshots in respect of the regulation of financial advisers, LRBAs and superannuation:
The system aims to provide long term funding in Australia with recommendations to improve superannuation for fund members, as well as the Australian financial system.
The Government has outlined in its accepting response to the inquiry that:
- the superannuation objective will be put into legislation, aligning policy settings and community expectations;
- the Productivity Commission is being tasked with assessing the efficiency and competitiveness of the superannuation system;
- an alternative model for formal competitiveness will be developed by the Productivity Commission;
- additional measures to improve the current system will be explored; and
- legislation to allow trustees of funds pre-selected retirement income products will be developed.
The takeaway for those trying to make the best of their SMSF investments is that real estate is still an option. "Property syndication and development is a large part of my practice and I've been connecting Troy and his clients with my contacts, putting together solutions tailored for SMSFs, so the news that this remains status quo is great news for our clients." John Gdanski, Principal (property and development)
Financial Advisers and ASIC
The inquiry highlights some significant changes to the financial services industry, suggesting a focus on accountability of advisers with a view to improving consumer outcomes.
The Government has responded by aiming to lift financial adviser’s standards by:
- legislating to make issuers and distributors of financial products accountable;
- developing a professional standards framework for financial advisers;
- the Financial Sector Advisory Council will be reconstituted to report back on regulators performance by the end of this year;
- giving ASIC the power to ban individuals from managing financial firms;
- giving ASIC the ability to intervene, change or remove financial products it considers harmful; and
- developing legislation to enable disclosure for financial products and improve regulations.
To establish your SMSF or limited recourse borrowing arrangement from your super fund, contact David Patkin.
If you would like to discuss opportunities around property syndication out of your SMSF, please contact John Gdanski.