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As one bank warns brokers to prepare for changes to SMSF lending, battlelines have divided the industry.
St George Bank recently revealed that it has already started planning for government changes to SMSF lending after the Financial System Inquiry recommended that SMSF loans be scrapped.
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According to a recent poll on The Adviser's website, 14.1 per cent of respondents said an SMSF lending ban would have a major impact on their business.
Another 11.7 per cent said it would have a moderate impact, 21.9 per cent said it would have a minor impact and 52.3 per cent said it would have no impact.
Mortgage Success director Katrina Rowlands offers SMSF lending to her clients, but said she feels no need to plan for future changes as the SMSF space has never been a target market for her business.
“The day that SMSF became a selling tool for a broker or a bank, my view is that it was always going to lead to wrong behaviours,” Ms Rowlands told The Adviser.
She said SMSF loans were targeted by the Financial System Inquiry because they became marketing and investment vehicles.
“It took the profile off the property having to be the mainstay of what the decision was,” she said.
“It became a tax benefit and the property was a consideration, but it didn’t matter what it was worth or if it would be that long term.
“It became too diluted in what it should achieve in every case required.”
My Mortgage Freedom chief executive Anthony Alabakov does not believe SMSF lending will be scrapped.
“It is something that is a bit of a buzz topic and unfortunately it has been the property spruikers and the people providing the wrong advice around SMSFs,” Mr Alabakov said.
“But for the majority there are some sound strategies for tax minimisation and capital gains exemption to invest through an SMSF,” he said.
“I don’t believe it will go. I just think they need to stamp out the spruikers and the people providing the wrong advice to those with minimum funds in their super.”
St George’s general manager of mortgage broking, Clive Kirkpatrick, urged brokers to take advantage of SMSF lending while it still exists, but to be aware of future changes.
“It depends what the government will accept, what level of change. They may not scrap it completely; it may just be restricted to commercial property,” he said.
“We know that certain brokers are reliant on investors and if things change, how will that affect their business?”
However, Mortgage Ezy chief executive Peter James, a former financial planner, said no changes are necessary.
“That position is formed from seeing the actual applications in the door and seeing what a low LVR and a conservative approach they are taking,” Mr James said.
“As a former financial planner, what worries me today is that people are very overweight in shares,” he said.
“What the lending does is it enables small to medium SMSF holders to actually balance their portfolio to include property.”
Mr James said SMSF lending is “absolutely integral to doing those things and much more”.
“It really depends on whether the government of the day feels political mileage can be gained from this issue, more than whether there is an economic or risk reason to limit SMSF lending,” he said.
In the meantime, St George has streamlined the SMSF lending process for brokers in a bid to boost business before any changes are made.
This week, new system enhancements came into effect for the lender’s SMSF products, including the removal of a financial advice certificate requirement.
A new online super fund calculator has also been launched, which allows brokers to use data from the calculator in their applications through auto-transfer of data to the application.
[Related: Associations form battlelines on SMSF borrowing]
The Adviser will cover the SMSF lending sector in greater detail in its March edition, which is due out in mid-February.
