Former federal treasurer Peter Costello has argued against banning the use of direct borrowing within superannuation, saying the reasons for the proposal are not factually based and not enough credit has been given to SMSF trustee competency.

The federal government will consult “with an open mind” on the future of limited recourse borrowing arrangements and talk to all stakeholders before making a decision, according to Assistant Treasurer Josh Frydenberg.

Changes made late last year to the draft legislation tabled in parliament governing the refund of excess non-concessional contributions (NCC) have provided further clarity on how the rules will operate and a positive result for SMSF trustees already drawing a pension.

Limited recourse borrowing arrangements (LRBA) used to acquire assets within superannuation will be scrapped if the recommendations of the Financial System Inquiry (FSI) report are followed.