MGD Wealth has today welcomed the decision by Federal Government to reject a recommendation to remove direct borrowing by superannuation funds.

The decision came to light in the release of the Government’s response to the Financial System Inquiry this morning, where the Government has confirmed that it does not agree to prohibit limited recourse borrowing arrangements by superannuation funds.

MGD Wealth Director and Chair of Self Managed Independent Superannuation Funds Association (SISFA), Michael Lorimer, welcomed the move.

“As predicted the Government has seen through the recent media-fuelled debate about the future of borrowing through superannuation funds. Today’s announcement is certainly aligned with what we have been saying for some time now,” Mr. Lorimer said.

“Any calls to wind back the ability for superannuation funds to borrow directly do not properly address the debate that needs to be had around superannuation and exposure to debt. Put simply, prohibiting superannuation funds from borrowing directly would not have prevented them from effectively leveraging their assets through other investment vehicles widely available in the market place.”

Mr. Lorimer went on to say that the real issue with limited recourse borrowing arrangements through superannuation is how and why consumers end up with them.

“These arrangements typically arise in connection with the purchase of real property and more often than not it is the particular property that leads to the borrowing, which may not be the most appropriate strategy taking into account all the relevant circumstances.

“This is the tail wagging the dog and MGD’s long-held philosophy has always been that advice and strategy must come first, be appropriate in the circumstances and be delivered by suitably qualified professional advisers,” Mr. Lorimer concluded.

Disclaimer: This article contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.