APRA points to challenges in super mortgage offsets
Any Government legislating the use of superannuation for home ownership would need to build strong regulatory guardrails, according to the Australian Prudential Regulation Authority (APRA).
The regulator has used a submission to the Senate Economics References Committee to point out potential pitfalls including some of the proposed regimes being open to scams or fraud.
It has also pointed to inconsistencies with best financial interests duty, the sole purpose test and the prohibition on financial assistance.
In a supplementary submission responding to the committee’s preliminary report which substantially backs the use of superannuation for housing via a mortgage offset, APRA makes clear the regulatory complexities.
“APRA’s preliminary view is that regulatory implications of using superannuation as a mortgage offset would vary depending on whether the funds used for the mortgage were offset within the superannuation system or released from the superannuation system,
it said.
“If funds remain inside the superannuation system while being used as a mortgage offset, the challenge would be that while the superannuation trustee would remain the legal owner of the funds, the trustee would not be able to generate a return on the funds while they are used for offset purposes,” it said.
APRA said this situation would have implications for obligations imposed under the Superannuation Industry Supervision Act 1993, including the best financial interests duty, the sole purpose test and the prohibition on financial assistance.
“Further, an arrangement where the funds remain within the superannuation system but are used as a mortgage offset is likely to be complex and difficult to administer due to multiple parties (e.g lenders, trustees, members) to the arrangement with potentially competing interests in relation to the offset funds,” it said.
It said that if funds were moved outside of the superannuation system, the possible impact on the liquidity of superannuation funds and how trustees would manage the impact would need to be considered.
“Under either approach, there is the potential for a mortgage offset scheme to be subject to scams or fraud and legislative safeguards would be necessary to manage the risk,” APRA said.
Hey APRA & ASIC what are you doing about the $7.8 BILLION scammed from Aussies in the last 3 years ?
Doesn’t seem to be much of a concern to you does it.
Yet try to touch Industry Super FUM and there is a lengthy laundry list of concerns about everything
Imagine Industry Super being forced to sell some Unlisted Assets at values that are well below what’s booked.
Mmmmm now that is a concern as the whole Industry Super Unlisted Asset Ponzi scheme would be exposed
APRA sound like an extension of Industry Super with their comments.
I am sure it could work, if we wanted it to. I mean, it’s not like a whole bunch of legislation was introduced to accommodate super funds providing conflicted advice via an uneducated sales force.
Essentially, this is the Libs policy for trying to blow up the unlisted assets of Industry Super via liquidity issues.