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IPA welcomes 'common-sense' govt response on LRBAs

The IPA has welcomed the Government's response to the Financial System Inquiry.

IPA welcomes 'common-sense' govt response on LRBAs
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Within the response, the Government rejected a proposal to reinstate the banning of limited recourse borrowing arrangements (LRBAs) within an SMSF.

Rather than a ban on LRBAs, the IPA has advocated that more targeted measures to address inappropriate use of gearing linked to poor quality advice would be a more suitable solution.

“The IPA believes that the issue is not SMSF borrowing per se, but inappropriate advice provided by unlicensed advisers,” said Andrew Conway, IPA CEO.

“A sledgehammer approach was never going to be an appropriate way to eliminate the use of poor quality advice relating to SMSF related gearing,” he added.

Mr Conway noted that the IPA agreed with the Government’s observation that while some anecdotal concerns over LRBAs exist, there is insufficient data to justify a ban.

“Interestingly, there are also no alternative measures other than an outright ban to mitigate some of the concerns raised. For example, if they are worried about the diversification, why not consider excluding LRBAs for funds with small balances,” he stated.

“We welcome the Government’s common-sense approach to this measure."

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