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LRBA changes mostly affect Melbourne, Sydney retirees

Incoming changes to LRBA provisions are likely to affect the majority of SMSF trustees in Melbourne and Sydney who are approaching retirement and have recently purchased a property within their fund, according to a major financial institution.

   

 

IOOF senior technical services manager Julie Steed told SMSF Adviser that laws currently before parliament to add a member’s LRBA balance to their total super balance if the member had a related-party LRBA would have larger consequences than expected, due to the explosion in related-party LRBAs since the major lenders exited SMSF loans.

“I would say 90 per cent of the LRBAs I’ve helped advisers with in the last 12–18 months have been related-party loans,” Ms Steed said.

“If I’m an adviser, my dealer group will say an LRBA is a financial product, and as such, the LRBA has to be on my APL, but when you look at the current providers who will loan LRBA products, most of them are not major lenders or associated with AFSL holders.

“So, most people are getting a line of credit on their mortgage and there are plenty of online administration houses available to set up the LRBA relatively inexpensively, so advisers are able to get those documents within an hour’s appointment.”

Ms Steed said the new laws, expected to pass parliament in the coming weeks, would cause problems for trustees looking to pay off their LRBA in the years approaching retirement, particularly those in the major capital cities where property values were higher.

“If you’re in South Australia, it is feasible to buy a residential investment property within 10 kilometres of the CBD for under $500,000, but in Melbourne and Sydney, if you want a two-bedroom apartment in that distance of the city, you are well in excess,” she said.

“If I’m 50 and buying that type of property in Sydney, it’s likely I will get to 65 and have an outstanding loan amount that I would be looking to extinguish with NCCs. But adding back the unpaid amount of LRBA to my total super balance puts me over the $1.6 million, which means my eligibility to make NCCs is nil.”

Ms Steed added that the only way to get around the new laws was for trustees to refinance their property with a non-related party lender, which presented its own problems.

“One of the things with going to second-tier lenders is that they might be good mortgage brokers but perhaps not know very much about super law, so their ability to advise clients as to the structure and the whole process possibly isn’t there,” she said.

“That is where they would advise the trustee to go and get professional advice, but if a lot of trustees who feel quite happy to not be advised use second-tier lenders, they are the exact type of people who wouldn’t bother to take that advice and would then fall foul of the laws.”

 

 

Sarah Kendell
29 August 2019
smsfadviser.com

 


David Forrest Download David's Adviser Profile

David Forrest

Director
BEc (Acc), MBA, CPA, FFin

David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.

David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.

Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.

David maintains a strong personalised client service focus, providing tailored solutions for clients.

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David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846

Michelle Forrest

Michelle Forrest

Business Finance Manager
B Bus (Acc), CPA

Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.

Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.

With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.

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Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.

Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.

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Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.

Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.

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