28 June 2000

Exception to Superannuation IN-House Asset Rules

The Assistant Treasurer, Senator Rod Kemp, today announced the commencement of regulations which allow small superannuation funds to invest in certain related companies and unit trusts.

The regulations give effect to a concession announced when the Superannuation Legislation Amendment Act (No. 4) 1999 was passed.

These regulations facilitate joint ownership of business real property by small superannuation funds (with fewer than five members) and their related parties, by allowing a superannuation fund and a related party to jointly own a company or trust that owns business real property. The company or trust may also own other assets, where not specifically excluded by the regulations.

Investments by small superannuation funds will not be in-house assets, where the investments are in companies and unit trusts that comply with certain requirements. These requirements include (among other matters) that:

  • the company or trust does not borrow;
  • there is no charge over an asset of the company or trust;
  • the company or trust does not invest in or loan money to individuals or other entities (other than deposits with authorised deposit-taking institutions);
  • it has not acquired an asset from a related party of the superannuation fund (after 11 August 1999) other than business real property;
  • it does not acquire an asset (apart from business real property) that had been owned by a related party of the superannuation fund in the previous three years (not including any period of ownership prior to 11 August 1999);
  • it does not directly or indirectly lease assets to related parties, other than business real property;
  • it does not conduct a business; and
  • it conducts all transactions on an arms length basis.

The Government sought the views of accounting and other industry bodies when developing these regulations.

In addition, the Government has given consideration to whether the business real property exemption in section 66 of the Superannuation Industry (Supervision) Act 1993 should be extended to cover undeveloped commercial land that is not being used in a business. The Government will not be proceeding with such a change at this time, given the definitional issues involved but will continue to consult with industry.

CANBERRA

28 June 2000

Media contacts: Richard Allsop Assistant Treasurers Office (02) 6277 7360

Geoff Painton Treasury (02) 6263 3205