Powered by MOMENTUM MEDIA
SUBSCRIBE TO OUR NEWSLETTER SIGN UP
Powered by MOMENTUM MEDIA

Must Read

data banking CDR
January 20 2022

Sherlok secures access to open banking data

The mortgage technology provider has tapped into open banking data, which will power its single-clic...

money grants
January 20 2022

Grow Finance concludes $35m capital raise

The lender’s co-chief executive believes this will sustain growth as it aims to secure 1 per cent...

Siobhan Williams 850 ta
January 19 2022

Pepper names mortgages head

The non-bank lender has appointed a new head to lead its residential sales team for mortgages. ...

property buying home
January 19 2022

Tasmania rolls out granny flat grants

The state’s government has thrown support behind the construction of granny flats, presenting the ...

finance education
January 18 2022

Asset finance accreditation the next ‘battleground’: CAFBA

CAFBA has underscored the importance of education for brokers diversifying into asset finance, as th...

signature
January 18 2022

Brokers drive origination growth for Prospa

The non-bank’s latest quarterly figures mark a year-on-year growth of 85 per cent, with the bulk o...

Latest Podcast

Damien Roylance

RECEIVE BREAKING NEWS DIRECT TO YOUR INBOX EACH DAY

SUBSCRIBE

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Labor urged to be ‘careful’ with LRBA changes

thinktank sheldon ta thinktank sheldon ta
Reporter 6 minute read

The possibility of a Labor government banning LRBAs could be a cause for concern for commercial property lenders like Thinktank, which recently hit the $1 billion mark in loans under management.

Thinktank has urged the Australian Labor Party (ALP) to “think carefully” before imposing a ban on limited recourse borrowing arrangements (LRBAs), particularly when it comes to commercial property.

The lender’s CEO Jonathan Street acknowledged the “genuine need” for “tighter regulation” in the residential self-managed super fund (SMSF) LRBA market.

He recently noted that there have been reports of instances where the interests and motivations behind LRBA finance applications may have been “inherently conflicted”, investment strategies were “negligent”, and the types of property used as security were “fundamentally ill-suited to small balance SMSFs including concentrations of off-the-plan, inner-city, high-rise apartments”.

Advertisement
Advertisement

While the Council of Financial Regulators and the Australian Taxation Office ultimately concluded that SMSF LRBAs are “unlikely to pose systemic risks”, they expressed concern over the “prevalence of property as the main asset purchased” under an LRBA, noting that the purchase of property as the main asset is “most commonly by low-balance SMSFs (those under $500,000)”, which have “little investment diversification and high [loan-to-value ratios]”.

Based on Thinktank’s experience, Mr Street noted that LRBAs are “proving [to be] a very important debt instrument”, allowing small to medium-sized enterprises (SMEs) and self-employed owners the ability to “dovetail their commercial and superannuation ambitions to very positive effect”.

“Business operators are typically financing their business premises via their super fund and pursuing a very tax-effective wealth management strategy squarely aimed at best supporting themselves and their families in retirement,” the CEO previously said.

He further pointed out that, since December 2013, Thinktank has financed more than 300 commercial property-secured LRBAs, accounting for $165 million of its loan book.

“Importantly, we have had practically zero arrears history – only one loan has ever defaulted in the wake of a cyclone (and that loan did not incur a loss) and 81 per cent are currently repaying principal and interest in alignment with their retirement targets,” Mr Street said.

PROMOTED CONTENT


“It’s proving an excellent, highly performing borrowing and wealth management option when in the hands of responsible, disciplined lenders and well advised borrowers.”

While the scrutiny has been around residentially secured LRBAs, the Thinktank CEO sees the potential ban on LRBAs, if the ALP is elected into government, as the only “foreseeable wrinkle” in the lender’s growth path.

The specialist lender had confirmed its entry into the residential SMSF market last month, after six years of providing SMSF LRBAs secured by commercial property. The entry followed a number of withdrawals from the SMSF residential market by lenders such as CBA, NAB, Westpac, AMP and Macquarie.

The Thinktank chief executive admitted in March that, thanks to the outgoing banks, there is an “even greater market opportunity” for a “pragmatic and experienced lender to assist well informed, well advised borrowers with their own long-term wealth creation plans”.

Thinktank’s call for caution around LRBA changes coincides with its announcement of hitting $1 billion in loans under management since its inception in 2006.

The lender has been growing its loan book by 35 per cent or more a year since 2013, and expects to surpass $2 billion in loans under management by the end of 2021.

“Self-employed small businesses and SMEs are behind the demand for our loan products,” Mr Street said.

“The sector has proven itself to be a vital part of the broader economy over the past 70-plus years and, with our experience, that means few loans are in arrears, and the number of loans that have defaulted and resulted in a loss over our 13-year history is minuscule at about 10 out of the more than 2,500 we’ve made.

“Considering this period includes an event such as the GFC, it’s a record we are very proud of.”

Thinktank expects to report a turnover of more than $75 million in the 2018-19 financial year.

[Related: Commercial property lender expands sales team]

Labor urged to be ‘careful’ with LRBA changes
thinktank sheldon ta
TheAdviser logo

Grow your business exponentially in 2022!

Discover the right strategies to build a more structured, efficient and profitable businesses at The Adviser’s 2022 Business Accelerator Program.

Visit the website here to secure your ticket.

thinktank sheldon ta

 

Latest Opinion

nick Young

Glimpses into 2022: In the wake of the ‘perfect storm’

According to industry veteran Nick Young, Trail Homes, with so many concurrent pressure points, it’s no wonder that 2021 was the “perfect storm”...

Peter Cole

5 things to consider when choosing a credit repair agency

Credit repair and debt management have been going through an overhaul recently. But how do you choose a company to partner with? Peter Cole, director ...

Sascha moore headshot red

When coming of age is a curly beast

As women, we’re conditioned – and categorised, constantly. While it’s no different for men, for us, the effects are arguably often more far-rea...

LATEST OPINION

COVER STORY

Australian Broking Awards 2021

More than 700 people attended this year’s Australian Broking Awards in early December, with the leading lights of the mortgage and finance broking industry coming together for a long-overdue celebration of excellence

FEATURED ARTICLES

The rising need for LMI

Property prices have soared by over 20 per cent during the COVID-19 crisis, making it increasingly difficult for first home buyers to enter the housing market.

Freeing clients from the debt spiral

There is renewed optimism in Australia as we head into a new year and the country opens up to all Australians.

Read the latest issue of The Adviser magazine!
The number one magazine for mortgage brokers
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more