Calliva head rejects criticisms
The head of financial services provider Calliva Group has hit out at industry body criticisms of new super legislation allowing geared borrowings in self-managed super funds (SMSFs).
Calliva chief executive Vince Scully urged investors to “ignore” criticisms of the Tax Laws Amendment Act of September 24 last year by the Financial Planning Association and Association of Superannuation funds of Australia.
Scully said these organisations were “simply putting the interests of their members ahead of the retirement saving of Australians by arguing that the amendment had gone too far in the range of permitted borrowing”.
“The amendment to which they refer are admirable for its simplicity and clarity, and simply placed all asset classes on a level playing field.
The amendments represent a legislated exception to the general borrowing restriction in the Super Industry Act of 1993, and allows super funds to invest in leveraged instalment warrants provided the loan is limited recourse.
However, the amendment goes further than merely sanctioning the use of instalment warrants over listed equities, which Scully believes is where the industry bodies wanted it to stop.
It extends a SMSF’s ability to gear via instalment warrants to all categories of approved super assets that a fund could buy directly, such as commercial property and residential property.
Scully said there could “not be any merit in a suggestion (by the industry bodies) that debt internal to a product (as in geared managed funds or share instalment warrants) is somehow to be favoured over external debt borrowed directly by the super fund, so long as both are limited recourse”.
“Forcing a bundling of investment and the loan can only increase complexity and cost, both of which endanger the retirement savings of ordinary Australians.”
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