November 2022

2022 Report to Government on Leverage and Risk in the Superannuation System

The Council in conjunction with the Australian Taxation Office has completed its second report to Government on leverage and risk in the superannuation system. The report focuses on limited recourse borrowing arrangements (LRBAs) which allow a superannuation fund to borrow to purchase an asset, with the lender’s rights limited to that asset if the loan defaults.

Consistent with the first report prepared in 2019, the current report finds that LRBAs are unlikely to pose a material risk to the superannuation system or broader financial system and recommends continued monitoring and reporting on an ‘as needed’ basis to ensure appropriate oversight of these risks. However, the report finds that LRBAs continue to be a significant risk to some individuals’ retirement savings. Given this, the report concludes that the Government may wish to further consider current policy settings, particularly in light of the 2014 Financial System Inquiry’s recommendation that LRBAs be prohibited.

The Council provided its report to the Treasurer in late September 2022.