Personal guarantees needed for LRBAs

ThinkTank per amundsen LRBA limited recourse borrowing arrangements

11 October 2019
| By Chris Dastoor |
image
image
expand image

Calls to prohibit the use of personal guarantees to support limited recourse borrowing arrangements (LRBAs) fail to understand this is part of almost all lending to small business, according to commercial property lender Thinktank.

Per Amundsen, head of research, said the reasoning behind this practice was quite simple as the ultimate beneficiaries were those individuals whose guarantees were sought.

“Guarantees used to support LRBAs are specifically provided for in the SIS Act and ensure that their recourse to other self-managed superannuation fund (SMSF) assets is no less limited than the original lender, and if funds are provided as a source of repayment these are then deemed to be contributions to the SMSF,” Amundsen said.

The Financial System Inquiry in 2014 and Council of Financial Regulations in February 2019 recommended their abolition, as well as it being Labor’s policy in the last election.

The Government had resisted recommendations to end SMSF borrowing, although it wanted another review in three years.

Despite the proposal not being adopted, the Council of Financial Regulators report still concluded LRBAs posed no systemic risk to the superannuation system.

“It’s recognised that owner-occupied business premises make up a large part of this type of funding and that SIS Act regulations were specifically designed to allow for them,” Amundsen said.

“The benefits this offers to SME operators in planning and providing for their retirement cannot be questioned.

“The statistics published by the regulator continue to show that LRBAs remain at a level that is nowhere near problematic for SMSFs and that the real problems identified can and should be effectively dealt with through regulation and enforcement to eliminate any identified abuses.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

2 hours ago

Interesting. Would be good to know the details of the StrategyOne deal....

4 days 7 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 2 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 4 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

3 days 5 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

2 days 8 hours ago