Don’t get excited about borrowing in super


Peter Bobbin
The new rule now allowing superannuation funds to borrow has caused much anticipation within the industry, however, according to lawyer Peter Bobbin, it is nothing to get excited about.
Speaking at the Self-Managed Super Fund Professionals Association of Australia National Conference, Bobbin, a senior partner with The Argyle Partnership Lawyers, shed some light on the new section of the Superannuation Industry Supervision Act causing all the fuss — section 67(4A).
“[This new section] does not permit a superannuation fund to borrow, it relaxes the prohibition in section 67(1), but only if the conditions within the new expectations are met,” he explained.
“The proper starting point for analysis of this new law is not with section 67(4A) but with the prohibition in section 67(1) — a superannuation fund must not borrow or maintain an existing borrowing — this rule still applies.
“Section 67(4A) is an exclusion section that saves a superannuation fund from being in breach of the borrowing prohibition.”
Bobbin stressed to delegates that to enjoy this exclusion, the arrangement must comply precisely with the elements expressed in the new section and that there was no room for error.
Specifically, Bobbin said that based on the wording of the new law, it is not a borrowing; it is actually a debt funded asset acquisition.
“It is just ordinary gearing that just happens to be available in superannuation,” he added.
“Don’t get overly excited about it; just approach it like you would anything else.”
Recommended for you
A financial advice firm has been penalised $11 million in the Federal Court for providing ‘cookie cutter advice’ to its clients and breaching conflicted remuneration rules.
Insignia Financial has experienced total quarterly net outflows of $1.8 billion as a result of client rebalancing, while its multi-asset flows halved from the prior quarter.
Prime Financial is looking to shed its “sleeping giant” reputation with larger M&A transactions going forward, having agreed to acquire research firm Lincoln Indicators.
An affiliate of Pinnacle Investment Management has expanded its reach with a London office as the fund manager seeks to grow its overseas distribution into the UK and Europe.